A suspected Palestinian suicide bomber killed at least 18 people and wounded more than 90 when he blew himself up in a crowd of teenagers outside a seaside nightclub in Tel Aviv.
It was the deadliest bomb attack in Israel for at least four years and the worst since the Palestinians began an uprising against occupation eight months ago after peace talks stalled.
The Israeli army has imposed a blockade on all Palestinian towns and villages in the West Bank.
"All Palestinians are barred from entering and leaving the autonomous zones, and the border crossings are closed," a military spokesperson said.
The Israeli army also advised all Palestinians inside Israel to leave immediately.
The attack increased doubts that Israel would stick to its unilateral ceasefire.
The blast shortly before midnight at the Pacha nightclub, a popular haunt for Russian immigrants, caused carnage. Women wept and young victims lay groaning and being comforted by rescue workers. Pools of blood and severed limbs covered the pavement.
"We were waiting at the entrance to the discotheque and then we heard from our left a huge explosion," said Mr Alex Brodsky, aged 19. I saw people lying on the floor. Some had no legs, no arms.
The bomb was strapped to the attacker and spewed out bullets and nails when he detonated it in a crowd of youngsters waiting outside the club, police said.
Police said the bomber had killed himself and at least 18 other people. A radio reporter counted 18 victims of the blast at the morgue. Dozens of people were taken to hospital and doctors said some were in critical condition.
There was no immediate claim of responsibility. But the Israeli government was quick to blame the slaughter on Mr Arafat for failing to join the ceasefire and vowed to avenge the killings.
Before the blast, at least 450 Palestinians, 91 Israelis and 13 Israeli Arabs had been killed since the Palestinian uprising erupted last September after peace talks became deadlocked. The new deaths would take the overall Israeli death toll to 107.