Two Israelis, including a three-year-old girl, were killed when a Palestinian suicide bomber struck at a shopping mall in the Tel Aviv suburb of Petah Tiqvah.
The identity of the second victim was not immediately known. The blast, the first to hit the suburb northwest of Tel Aviv, in 20 months of the Palestinian uprising, injured more than 20 people, several of them seriously.
Israeli television showed pictures of a child's pushchair, blackened by the blast but still intact outside the small cafe where the bomber blew himself to pieces.
"I heard a huge explosion - the whole town heard it," one man told Channel Two television. "I went to the scene and there were wounded everywhere - someone with their leg blown off, one with his stomach ripped open," he added.
Israeli public radio said police had sealed off the area and were searching for a possible second suicide bomber.
The bomber detonated his explosives outside a cafe near the entrance to a large shopping mall on Gissin Street.
It was the first suicide bomber to succeed in hitting his target since May 22, when a young Palestinian killed himself and two Israelis in Rishon Letsion, another Tel Aviv suburb to the south.
Petah Tiqvah is just 10 kilometres (six miles) southwest of the Palestinian self-rule town of Qalqilya, which was occupied by the Israeli army on Sunday as troops carried out searches for militants who use the community as an entry point into Israel.
The army pulled out briefly on today before re-entering the town in an operation that left 10-year-old Palestinian twin sisters slightly injured.
Israeli military sources said the forces had pulled out of the town, but were still surrounding it tightly, when the blast occurred.
A senior Israeli official was quick to blame Palestinian leader Yasser Arafat for the attack.
"Yasser Arafat is the chairman of the Palestinian Authority and is directly responsible for the inaction of his security services. He talks about reform but does nothing against terrorism,'' said the official from Israeli Prime Minister Ariel Sharon's office.
"If Arafat is incapable of stopping terrorist attacks, most of which are perpetrated by militants from his own Fatah movement, then let him resign and give his place to other, more efficient, Palestinians,'' said the official on condition of anonymity.
The Al-Aqsa Martyrs Brigades, an armed offshoot of Fatah, have claimed several recent anti-Israeli attacks, ignoring demands by the Palestinian leadership and Arafat himself to spare Israeli civilians.
Fatah even distanced itself from its military splinter group last week week, saying it had "no link with the statements published by the Al-Aqsa Martyrs Brigades, nor with the parties and individuals who claim to belong to it."
"In any case, not a single reform nor the slightest political process can take plong as terrorism continues," the Israeli official added.
He warned the Israeli army would continue its incursions in autonomous Palestinian areas such as the recent raids into the West Bank towns Tulkarem, Bethlehem and Qalqilya. Israel "will continue to use all means to protect the Israeli population,'' he said.
AFP