Israeli troops wounded seven Palestinians, one of them seriously, tonight when they opened fire on the village of Beit Jala, in the West Bank, Palestinian medical sources said.
The seriously injured man, a Palestinian policeman, was hit by a live round, they said.
The other six - three policemen and three civilians - were lightly wounded by shrapnel from tank shells.
Another six Palestinians were hospitalised for shock, the source said.
Palestinian witnesses said the army opened fire with machine guns and tanks, and that the shelling hit three buildings, one of which caught fire.
They said the firing lasted 20 minutes.
An Israeli military spokesman said troops had opened fire on a group of armed men who had taken up positions facing the Jewish settlement of Gilo, in Israeli-occupied east Jerusalem before the men could begin to fire themselves.
The spokesman said the same group had fired on Gilo the night before.
Earlier, a military spokesman said shots had been fired from Beit Jala Tuesday, drawing the army response.
Earlier Prime Minister-elect Ariel Sharon's Likud party gave the centre-left Labour Party one week to join a broad-based government seen as Israel's best hope for peacemaking with the Palestinians.
Members of the right-wing Likud said they would seek other partners to form a government if Labour leader Ehud Barak, the outgoing prime minister, did not secure the agreement of his party to join a coalition government by the end of Monday.
Failure to lure Labour into a coalition would force Sharon to form a narrow right-wing coalition with religious parties which could block peace talks with the Palestinians.
In a statement likely to anger Labour, Sharon said he planned to include rightwingers Rehavam Zeevi and Avigdor Lieberman in his cabinet. Labour members have made clear they would not favour their inclusion in the government.