Two Israelis, including a two-month-old baby girl, have been killed in an attack on a Jewish settlement in the West Bank, emergency workers said.
There has been a fortnight of relative calm
The Palestinian attacker was also killed, and two other people injured.
The attack, in the settlement of Negohot, near Hebron, took place as Israelis celebrated Jewish New Year.
Earlier on Friday, the four powers behind the Middle East roadmap peace plan condemned Palestinian attacks and said Israeli settlements must stop, in the latest attempts to revive the faltering process.
"Each party must do more to address, immediately and simultaneously, the core concerns of the other as described in the road map," UN Secretary General Kofi Annan said, reading a joint statement.
The United States, United Nations, European Union and Russia were meeting on the sidelines of the UN General Assembly.
Mr Annan - speaking for himself - said Israel and the Palestinians "seem unable to find their way out of the current quagmire" without outside help.
"Bold steps cannot be taken without consent of the parties. Equally, the current dangerous impasse can only be broken through revitalised and active international involvement," he said.
The plan - which calls for a Palestinian state by 2005 - was launched in April but it has come close to collapsing amid continuing violence.
The BBC diplomatic correspondent Barnaby Mason, at the UN, says Mr Annan gave no hint of what "bold steps" might be.
Arafat's fate is high on the agenda
But for a member of the quartet to make such a plea implies criticism of its efforts and of its dominant member, the United States, our correspondent says.
US Secretary of State Colin Powell avoided criticising Israel in his remarks, while describing the US as "an open, honest broker".
Mr Powell said the next step was up to the Palestinians, and he said the world was waiting to see whether the Palestinians could install a prime minister "who will enjoy political authority and control over all the security forces".
Mr Powell dismissed the idea of an international conference on the Middle East, put forward again this week by President Jacques Chirac of France.
Friday night's attack came despite increased security for the Israeli holiday celebrations, in which the Israeli army imposed a total blockade of the Palestinian territories and cancelled all Palestinian travel permits.
Israel radio reported that the Palestinian attacker was a lone gunman who appeared to have got through the settlement's fence.
He was shot and killed by Israeli soldiers, the radio reported.
At least five Palestinians and an Israeli soldier were killed in skirmishes in the West Bank and the Gaza Strip on Thursday.
The latest violence follows two weeks of relative calm after a spate of Palestinian suicide bombings and strikes against Palestinian militants by Israeli forces.
Earlier this week, the spiritual leader of the militant group Hamas, Sheikh Ahmed Yassin, ruled out a truce with Israel.
Sheikh Yassin delivered his statement in Gaza, in his first public appearance since Israel attempted to assassinate him on 6 September.
Quartet members say they are determined to stick to the roadmap.
But only the US can exert significant influence over Israel - and most Palestinians believe Washington is biased in Israel's favour, says the BBC's David Chazan.