The seafront area is a popular nightspot
Four people have been killed and more than 50 injured in a suicide bombing at a cafe in the Israeli city of Tel Aviv.
The blast came just hours after new Palestinian Prime Minister Mahmoud Abbas won approval for his cabinet and vowed to crack down on militants.
Israel said the suicide attack represented a "complete failure" in security for the new administration.
The BBC's James Reynolds in Jerusalem says the bombing follows a familiar pattern of attacks coinciding with apparent diplomatic advances towards peace.
But he adds that the Tel Aviv explosion is unlikely to delay the publication of a peace "roadmap" by international mediators which was promised once Mr Abbas took office.
The plan for peace in the Middle East will be presented to Israeli and Palestinian leaders later on Wednesday, UN envoy Terje Roed-Larsen said.
Mr Abbas was sworn in as prime minister just hours after the suicide attack, in a ceremony at the West Bank headquarters of Palestinian leader Yasser Arafat.
Saeb Erekat, a member of Mr Abbas' new cabinet, condemned the attack but said the new government was "committed to its security obligations".
"The only way to stop... this cycle of violence is by reviving a meaningful peace process," he added.
Cafe ripped apart
The bombing happened at about 0100 local time (2200 GMT), in a seafront area which is usually very busy at night.
Police say a Palestinian suicide bomber, who is among the dead, detonated the bomb at the cafe entrance, after failing to get past a security guard.
We saw fire coming out
of the bar, people all burned up, running out
The front of the cafe was ripped apart by the blast and there was splintered wood and glass everywhere.
The cafe is near the US embassy and reports say those inside included Americans, Britons and French.
Police said most of the injured were young people.
"We saw several young men, burned up, coming out of the pub," a witness told Israel radio. "We were in a nearby nightclub, waiting for a friend at the entrance.
"And then 10 metres from here, we saw fire coming out
of the bar, people all burned up, running out."
The cafe, Mike's Place, is a popular European-style bar, with some tables outside.
The new Palestinian prime minister is a critic of militant attacks on Israelis.
In his first policy speech, ahead of Tuesday's vote approving the cabinet, Mr Abbas denounced violence and pledged to control militant groups and illegal weapons.
ROADMAP: WHAT WE KNOW
Phase 1: End of terrorism, normalisation of Palestinian life and Palestinian political reform; Israeli withdrawal and end of settlement activity
Phase 2: Creation of an independent Palestinian state; Palestinian elections and international monitoring of compliance with roadmap
Phase 3: Permanent status agreement and end of conflict; agreement on final borders, Jerusalem, refugees and settlements; Arab states to agree to peace deals with Israel
But his stance was rejected by the Islamic militant group Hamas, which said it would not disarm.
Israeli government spokesman Dore Gold said: "This is really the first test for the new Palestinian government... and unfortunately it has turned out to be a complete failure in the area of security.
"Security isn't something you wait for - you don't wait for roadmaps... you act right now, and that unfortunately did not happen."
The new cabinet under the first Palestinian prime minister is the result of intense international pressure on Palestinian leader Yasser Arafat to give up some of his powers and implement democratic reforms.
The ministers in the new cabinet include both critics of Mr Arafat and loyalists from his mainstream Fatah movement.
The White House has condemned the Tel Aviv bombing but said it would not derail plans for the "roadmap".
The US and Israel have refused to deal with Mr Arafat, who remains isolated in Ramallah by Israeli forces.
The BBC's Jon Leyne in Washington says the Americans are keen to deal with Mr Abbas - usually known as Abu Mazen - but are anxious not to make him look like a US puppet.