A Palestinian man has opened fire on passers-by in a shopping district of Jerusalem, injuring four people, two of them critically, before being killed by an Israeli soldier.

The attack occurred in Talpiot, a district of shopping malls and car repair outlets in the southern area of the city.

Jerusalem police chief Mickey Levy says the gunman, identified as a Palestinian from the West Bank, opened fire with a pistol.

Chief Levy says an Israeli soldier who happened to be in the area then opened fire and killed the man, whom he described as a "terrorist."

Israeli Army radio reported that the gunman was member of the Popular Front for the Liberation of Palestine (PFLP), which claimed responsibility for last week's assassination of an Israeli cabinet minister.

The Palestinian leadership says it has banned the armed wing of the radical PFLP, but has suggested that the ban cannot be enforced while Israeli troops remain inside six Palestinian ruled-areas of the West Bank.

The group says it killed Israeli Tourism Minister Rehavam Ze'evi last week in revenge for the August assassination of its leader, Abu Ali Mustafa.

In response to the assassination, Israeli troops have launched their biggest military offensive in the West Bank since the signing of the Oslo accords in 1993.

Several members of the left-wing Labor party faction have threatened to leave the government if the operation is not halted soon.

In response, Israeli Prime Minister Ariel Sharon has told his Cabinet that he does not intend to permanently re-occupy Palestinian areas. He says the soldiers will be withdrawn once the Palestinians have halted their attacks and those responsible for the killing of Mr. Ze'evi have been captured.

But the Israeli military actions have not halted the attacks.

Earlier, Palestinian gunmen in the West Bank ambushed a bus carrying workers near a Jewish settlement, wounding one woman.