A car bomb exploded Monday in a busy shopping district in Jerusalem, but no one was seriously hurt in the blast.
The car exploded in a parking lot in the Talpiot area of Jerusalem near a road leading to the West Bank city of Bethlehem.
Police say the bomb was packed with bullets from automatic rifles. Several cars close to the vehicle that exploded caught fire after the blast.
Police closed off the area, and a bomb squad searched the neighborhood in case other explosives had been planted.
It was the first bombing against an Israeli target since Palestinian President Yasser Arafat and Israeli Foreign Minister Shimon Peres worked out a cease-fire agreement last week.
Mr. Peres met Sunday with senior Palestinian officials to discuss the truce. Palestinian negotiator Saeb Erekat described the talks as "difficult," while Mr. Peres reportedly complained about continuing Palestinian violence.
On Sunday, Israeli soldiers killed three Palestinians and the army reported shooting and mortar attacks by Palestinians.
The Israeli government has given Mr. Arafat 48 hours to enforce the cease-fire.
Palestinian militant groups Hamas and Islamic Jihad have said they will not honor the cease-fire, but reports say they agreed to halt bombings inside Israel to avoid an international backlash against the Palestinians.
The United States has urged both sides to restore calm, which is considered crucial to helping U-S efforts to recruit Arab and Islamic countries into an international anti-terror coalition after the attacks on New York and Washington.
There are some signs that both sides are taking tentative steps to try and make the truce work.
Regional commanders met in several parts of the Palestinian territories to discuss security matters.
Israel partially lifted a military blockade around the West Bank city of Jericho, an area that has been relatively quiet.
Israel also reopened the border crossing it controls between Egypt and the southern part of the Gaza Strip.
Palestinian police in Gaza fired tear gas at Palestinian protesters to prevent them from confronting Israeli soldiers.
Despite efforts to implement the truce, clashes are continuing as Palestinians hold demonstrations to mark the one-year anniversary of their uprising against Israeli occupation.