Two Israelis were killed and 20 wounded after Palestinian gunmen fired on a crowd of people in the northern town of Afula. Israeli police and witnesses say the two Palestinian gunmen opened fire at a crowded bus station in Afula.
The assailants fled to a nearby market firing automatic weapons in all directions. Police killed both Palestinians.
Members of the militant Islamic Jihad and Palestinian leader Yasser Arafat's Fatah movement claimed responsibility, saying the attack was a joint operation conducted by the two groups. Afula is close to the West Bank and has been the target of several terrorist attacks in the past year.
Meanwhile, U.S. envoys Tuesday began a new diplomatic effort designed to end more than a year of Israeli-Palestinian bloodshed.
State Department envoy William Burns and retired Marine Corps General Anthony Zinni met with Israeli Prime Minister Ariel Sharon and other top officials.
In a move designed to show Israel's security needs, Mr. Sharon took the envoys on a helicopter tour of the Jewish state and the Palestinian territories. Israeli government spokesman Zalman Shoval says the Afula attack demonstrates the importance of reaching a truce.
"This incident, of course, is tragic. But on the other hand it will enable our American friends to get a first hand impression of the situation that we are facing and how important indeed it is to try to achieve a cease-fire," said Mr. Shoval.
Earlier, under cover of darkness, Israel pulled its soldiers out of Jenin, the last Palestinian West Bank town still re-occupied by the military. Israel occupied six Palestinian-ruled towns in October, following the assassination of an Israeli cabinet minister by Palestinian militants.
The Jenin pullback had been postponed due to what the Israeli defense ministry said was a continuing threat of attacks from militants in the town.
The United States has repeatedly called for Israel to withdraw from Palestinian-ruled territory in the West Bank.
A Palestinian security official called the redeployment cosmetic, because soldiers continue to remain in positions around the town.