The restaurant was packed when the suicide bomber struck
A woman suicide bomber has killed herself and at least 19 other people at a restaurant in the northern Israeli port city of Haifa.
At least three children are reported to be among the dead in the attack, which left up to 50 people injured.
The huge explosion wrecked Maxim restaurant, which was jointly owned by Jews and Arabs and located on the sea-front.
The Palestinian militant group Islamic Jihad has claimed the attack, saying it was carried out by a woman from the West Bank town of Jenin.
Israeli Prime Minister Ariel Sharon has summoned his advisers for an emergency meeting to consider a response.
The BBC's Orla Guerin in Jerusalem says this is one of the deadliest attacks in the past three years, and it brings the Middle East to a critical moment.
Last month the Israeli cabinet threatened to "remove" Palestinian leader Yasser Arafat Israel - but it did not say how or when it would take action.
The announcement was made after 15 people were killed in twin suicide bombings in Jerusalem and Tel Aviv on 9 September.
Health Minister Dan Naveh said the latest attack presented an "opportunity to implement the cabinet decision to get rid of Arafat".
In another development on Saturday, Israeli forces killed a wanted Palestinian militant in the West Bank.
The suicide bomber shot dead a security guard at the entrance before rushing into the restaurant.
"There was a very big explosion, which blew out the windows. It was horrible," a witness told Israeli TV.
The Israeli Government blamed the Palestinian Authority for failing to disarm militant groups.
Palestinian Prime Minister-designate Ahmed Qurei, for his part, condemned what he called "an ugly attack" and is reported to have telephoned Haifa Mayor Yona Yahav to express his sorrow.
He also urged Palestinian groups "to fully halt these actions that target civilians and harm our legitimate and just national struggle," his office said in a statement.
The Haifa attack has drawn international condemnation.
US President George W Bush called it a "despicable" act that underlined the need for the Palestinian leadership to combat terrorism.
UK Prime Minister Tony Blair said such bombings did not serve the interests of the Palestinian people.
European Union foreign ministers, meeting in Rome, expressed their "deep consternation".
Also on Saturday, an Israeli anti-terrorism unit shot dead a Palestinian militant wanted for an attack last year which killed five Israelis.
Sirhan Sirhan - a member of the al-Aqsa Martyrs Brigades - was killed in the town of Tulkarm, Israeli officials say.
RECENT SUICIDE ATTACKS
9 September: 15 killed in Jerusalem and Tel Aviv
19 August: 23 killed in Jerusalem
11 June: 17 killed in Jerusalem
18 May: 7 killed in Jerusalem
5 March: 17 killed in Haifa
The Haifa bombing came as Israel imposed a total closure of the West Bank and Gaza Strip for Yom Kippur - the day of atonement - which runs for 24 hours from Sunday evening.
The Israeli military said the closure of the Palestinian territories was justified in view of the heightened risk of attacks by militants.
On Friday, the Islamic militant group Hamas said the security fence Israel is building in the West Bank would not prevent attacks on Israelis.