Israeli troops backed by helicopters are hunting for Palestinian militants who ambushed an Israeli bus on the West Bank, killing seven people.

At least 20 people were wounded in the attack outside the settlement of Emmanuel, Israeli officials said.

Women and children were lying on the floor, bleeding and screaming for help

Yitzhak Kaufman, Israeli paramedic

The Palestinian Authority condemned the attack, while Israel called off planned talks with Palestinian officials.

The violence came hours before a quartet of international powers met in New York to explore ways of trying to end the conflict between Israel and the Palestinians.

The attack was the deadliest against Israel since Israel pushed into Palestinian-ruled territories across the West Bank after two suicide bombings in Jerusalem killed 26 Israelis in June.

It happened at the spot where 10 people were killed in an almost identical attack in December, 2001.

Dressed as soldiers

Eyewitnesses said two or three Palestinians, disguised as Israeli soldiers, detonated at least one roadside bomb, causing the armour-plated bus to stop outside the settlement.

Rachel Gross, a high school student on board on the bus, said the gunmen opened fire as passengers fled the vehicle.

"I got down under the seats, as fast as I could, because the terrorists began firing bursts and throwing grenades, it went on and on it seemed like eternity," she said.

Yitzhak Kaufman, an Israeli paramedic who helped the wounded, told reporters: "It was a shocking scene. Women and children were lying on the floor, bleeding and screaming for help."

One of the wounded was a pregnant woman who was rushed to hospital and gave birth by Caesarean section, Reuters news agency quoted Israeli medics as saying.

The gunmen fled towards the West Bank city of Nablus, Israel radio said.

Israeli troops have been in control of Nablus since 19 June, when Israel launched a wide scale offensive against Palestinian militants.

The ambush came hours after Israel reimposed a curfew on the nearby town of Qalqilya after receiving warnings of an impending attack.

War of words

The latest attack intensified pressure on Palestinian leader Yasser Arafat, whom Israel and the US have sidelined as a peace partner.

A similar attack happened at the same spot last year

The Palestinian Authority (PA) said it condemned the attack "in accordance with its policies that reject targeting civilians, Israelis or Palestinians".

The PA has not previously spoken out against attacks on Jewish settlers, whom it accuses of occupying land claimed by the Palestinians.

Two Palestinian groups - the Democratic Front for the Liberation of Palestine (DFLP) and Al-Aqsa Martyrs Brigades, linked to Yasser Arafat's Fatah party - said they carried out the attack.

Israel blamed the Palestinian Authority for the killings.

Israeli Government spokesman David Baker said the attack was "further proof that the Palestinian Authority considers terrorism a primary mode of operation".

Diplomatic drive

In New York, officials from the US, United Nations, European Union and Russia, began talks on the crisis in the Middle East.

The BBC's Jon Leyne, who is in New York, says the "quartet" will be attempting to show there is political progress despite the continued violence, including Tuesday's bombing.

The meeting will consider a US blueprint for ending the fighting between Israel and the Palestinians and President Bush's demand for Mr Arafat to be replaced as Palestinian leader.

One compromise that may be discussed would be for Mr Arafat to be promoted to the largely ceremonial post of president and for an interim prime minister to take over the day-to-day work of governing the Palestinian people.