An official statement, broadcast on Israel Radio, said the government wanted guarantees from the Palestinian Authority that it was fighting a resolute war against terrorism.

The bomb exploded as the Israeli cabinet was debating the American-brokered deal under which Israel would return some more occupied territory to the Palestinians, in return for Palestinian commitments on security.

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The blast, which also injured 22 people, ripped through the Mahane Yehouda market - the same location where several Israelis were killed by a suicide bombing in July.

Israeli police say the two dead were suicide bombers belonging to the Islamic militant group, Hamas.

The Palestinian leader, Yasser Arafat, convened an emergency meeting of his security officials in response to the blast.

At the time of the signing of the recent peace agreement, Mr Arafat pledged to make "a 100% effort" to combat violence, but has repeatedly stressed that he cannot guarantee 100% results.

A Palestinian spokesman, Hassan Asfour, has condemned the bombing, saying all his colleagues in the Palestinian Authority were against terrorist attacks, whose only aim was to destroy the peace process.

Call for US help

Another Palestinian official, Nabil Abu Rudeina, called on the United States administration to intervene immediately to help implement the recent agreement between the two sides.

The US President, Bill Clinton, condemned the bombing. He said the "outrageous and cowardly" act should not derail the Middle East peace process.

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Eyewitnesses said a car exploded after crashing into a market stall, next to a bus.

Israeli police say that both the people killed were involved in carrying out the attack.

The market is in West Jerusalem, where the population is predominantly Israeli. The blast came as many people were out shopping before the Jewish sabbath, which begins on Friday.