The Israeli Prime Minister Mr Ehud Barak has closed Israel's borders with Palestinian-ruled areas after eight people were killed by a Paletinain bus driver this morning.
The eight Israelis were killed after a bus driven by a Palestinian veered into a bus stop used by soldiers and civilians.
Mr Barak promised to bring those responsible to justice describing the killings as "abominable".
Israeli officials described the incident as the deadliest attack by Palestinian militants during five months of renewed fighting.
Paramedics said at least 17 people were injured, including six who were in stable or serious condition. Many casualties were soldiers.
The Palestinian driver fled in the bus but was caught after a high-speed chase by police who fired shots at the vehicle and seriously injured him.
The attack occurred at about 0750 local time (5.50 a.m. Irish time) at a crowded bus stop in the small town of Azur, south of Tel Aviv.
Yesterday Israeli helicopter gunships killed a Palestinian security agent in an attack in the Gaza Strip. Israel said the man was suspected of attacking a Jewish settlement with mortars.
No group has admitted responsibility for today's bus attack.
The bus, owned by the Israeli company Egged, had transported Palestinian workers from the Gaza Strip to Israel this morning.
Bus company spokesman Ron Rattner said the driver was a Palestinian who had clearance from security services to drive Palestinian workers into Israel.
The driver, who was from the Gaza Strip, had been employed by Egged for the past five years, Israel TV said.
Israel had sealed the Palestinian areas for most of the past months but in recent weeks had eased the closure slightly, allowing several thousand Palestinian workers to return to jobs in Israel.
Witnesses said the bus was driven into soldiers and civilians at the bus stop then sped southwards toward the city of Ashdod.
About 10 miles to the south police opened fire on the bus, which crashed into the back of a lorry and stopped.
In the West Bank Palestinians reported a 25-year-old Palestinian man from the Nur Shams refugee camp was killed by Israeli army fire as he was driving on a back road trying to avoid an Israeli checkpoint.
AP