A suicide bomber has killed two people and himself and injured about 30 at the entrance to a shopping centre in the Israeli coastal town of Netanya.
Rescue services rush to the scene of the bombing
Palestinian militant group Islamic Jihad claimed the bomber, an 18-year-old male from the West bank.
It is the first suicide attack in Israel since Islamic Jihad attacked a Tel Aviv nightclub on 25 February.
Palestinian leader Mahmoud Abbas blamed the attack on traitors "working against the Palestinian interest".
The White House said it was an unjustified "vicious attack" on civilians.
'Clothes on fire'
Eyewitnesses say the bomber tried to get inside the shopping mall but was pushed away by security guards before blowing himself up.
Schools in Israel have broken up for the summer and it appears that a number of teenagers were among the injured.
Doron Shafir, a paramedic among those first to reach the scene, said he saw a woman whose clothes were on fire.
"Another, her handbag was burning," he added. "We stepped on it to put it out. She was just sitting there. She did not know what was happening to her."
The explosion in Netanya follows four months of relative calm in Israel.
Netanya has been a target in the past but that was before Israel began building its barrier around the West Bank.
Israeli Prime Minister Ariel Sharon has consistently called for Palestinian leader Mahmoud Abbas to launch a crackdown on militant groups.
Mr Abbas said the organisers of the bombing should be punished for their "stupid" attack.
"There is no rational man who can do those things on the eve of the Israeli withdrawal from 22 [Jewish] settlements [in the Gaza Strip and West Bank]," he added.
Jibril Rajoub, a security aide to Mr Abbas, called on all Palestinian factions to abide by the February truce with Israel.
Both Palestinian and Israeli sources identified the bomber as Ahmed Abu Khalil, 18, from the nearby West Bank.
In a farewell video message quoted by Reuters news agency, he said: "We reiterate our commitment to calm, but we have to retaliate for Israeli violations."
Israeli security forces report that a Palestinian was wounded on Tuesday trying to drive a bomb into a Jewish settlement in the northern West Bank.
A police spokesman said the man's van, which was carrying gas canisters, exploded about 100 metres (yards) inside the Shavei Shomron settlement and he was critically injured but nobody else was hurt.