A Palestinian man stabbed and killed two people in Jerusalem's Old City on Saturday before police shot him dead, Israeli officers said, amid an uptick in violence in the city and occupied West Bank.
Palestinian militant group Islamic Jihad issued a statement claiming the attacker as one of its members.
"The man approached a group of Jews, whipped out a knife and began stabbing," police spokesman Micky Rosenfeld said.
One woman was in a critical condition after the assault and a toddler was lightly injured, police added.
Violence has risen in East Jerusalem and West Bank in recent weeks. Though not at the levels of previous Palestinian uprisings or "Intifadas", it has raised Israeli fears of a greater escalation.
Israeli police and Palestinians have clashed frequently at East Jerusalem's al-Aqsa mosque compound, Islam's third holiest site, and at other parts of the city.
"According to what I see, the third Intifada has started," the man police identified as the knife attacker posted on his Facebook page on Friday, citing the tension at al-Aqsa.
Prime Minister Benjamin Netanyahu was due to convene an emergency meeting with security officials on Sunday, his office said, and a security cabinet meeting on Monday.
"We are deep inside a wave of terror and incitement," Israeli Intelligence Minister Yisrael Katz told Channel Two's Meet the Press show.
Palestinians want East Jerusalem, the West Bank and Gaza Strip, lands Israel seized in a 1967 six day war, for a future state. Peace talks collapsed in 2014.
On Saturday Israeli soldiers carried out a raid in the Palestinian city Nablus, arresting seven people and wounded eight more, after two Israeli settlers were shot on Thursday, Palestinian and Israeli sources said.
Settler leaders on Friday erected a protest tent outside Netanyahu's official residence in Jerusalem, demanding tighter security measures in the West Bank.
Katz said the government would consider cancelling work permits for Palestinian laborers in Israel and restoring military roadblocks that had been removed in recent years in the West Bank if the violence continued.
Thursday's shooting happened not far from a Palestinian village where two months ago Israeli arsonists set fire to a home, killing a toddler and his parents.
*The story was edited by Ahram Online.