It's the most horrible thing I've ever seen

Witness

The blast occurred in the Moment cafe, close to the official residence of Prime Minister Ariel Sharon.

It was the second successive Saturday on which Israelis had been targeted at the end of the Sabbath; nine died in a simliar attack a week ago.

An Israeli government spokesman said the attack, and an earlier gun attack which killed two Israelis in Netanya, were intended to sabotage the visit later this week of US special envoy Anthony Zinni.

Early on Sunday, Israeli helicopter gunships blasted the Gaza compound of Palestinian leader Yasser Arafat, completely destroying it, according to Palestinian officials.

Mr Arafat was not in Gaza at the time; he has been confined to Ramallah for the past three months by Israeli forces.

Earlier in the night Israeli helicopters fired on a refugee camp near Ramallah killing one man.

'Horrible'

The Jerusalem cafe was severely damaged in the explosion, and police blocked nearby streets to carry out rescue work.

The explosion is said to have happened just as crowds of Israelis were queuing up to get in.

A witness told Israeli TV: "A man walked in and blew himself up. There are pieces of him all over.

"The police are distancing people from the scene. It's the most horrible thing I've ever seen."

Palestinians took to the streets after the attacks

Dozens of Israelis have been killed by Palestinian suicide bombers in a year and a half of escalating violence.

Earlier in the day, two suspected Palestinian gunmen opened fire on passers-by in the northern Israeli town of Netanya, killing two people and wounding at least 35 people.

Police killed the gunmen after the 15-minute attack during which they targeted cars and pedestrians in a hotel district.

Retaliation

The BBC's James Reynolds says Israel usually follows suicide attacks on busy urban areas with military action against Palestinian targets.

What Arafat is looking for tonight is a regional deterioration in order to have the whole region involved in a regional war and Israel will not let him do it

Israeli spokesman Gideon Meir

A Palestinian group, the al-Aqsa Martyrs' Brigade, is reported to have said it carried out both the Netanya and Jerusalem attacks.

The militant group Hamas has also claimed responsibility for the Jerusalem blast.

But Israel blamed Palestinian leader Yasser Arafat for the recent violence.

"What Arafat is looking for tonight is a regional deterioration in order to have the whole region involved in a regional war and Israel will not let him do it," said Foreign Ministry official Gideon Meir.

For their part, the Palestinians accused Israel of ratcheting up the conflict and trying to wreck Mr Zinni's visit to the region.

Police uniforms

Throughout the day, Israeli forces kept up attacks on Palestinian areas, launching helicopter raids and rounding up hundreds of Palestinian men.

There have been mass detentions as Israel hunts for militants

The attack in central Netanya came at about 2030 local time (1830 GMT), when the streets would have been crowded.

The gunmen were dressed in Israeli police uniforms, eyewitnesses said. A woman and a baby girl died of their wounds following the attack.

Israeli helicopter gunships fired rockets around Yasser Arafat's headquarters complex in Gaza City on Saturday, injuring about 20 people.

It was the third missile strike on Gaza on Saturday. The Palestinian Authority complex in Nablus in the West Bank also came under attack.

On the ground, troops moved into the Dheisheh refugee camp in Bethlehem and declared a curfew in their search for suspected militants.

In other incidents in Gaza, two Palestinians were killed in a gun fight and a 15-year-old Palestinian girl appears to have been killed in crossfire.

Peace initiative

Mr Sharon has said he is willing to talk to the Palestinians about a ceasefire - apparently dropping his insistence on seven days of calm.

Zinni's forthcoming visit is focusing US minds on the Middle East

A senior US official told the AFP news agency that the escalating violence underscored the importance of General Zinni's visit.

The BBC's Stephen Cviic says the Americans have accepted that they will have to get their hands dirty.

Vice President Dick Cheney is due to begin a tour of Arab countries on Sunday.

Meanwhile Arab League foreign ministers meeting in Cairo have called on the international community to intervene to halt the violence.