Tensions remained high a day after Pentagon chief Lloyd Austin had, on a visit to Israel, called for de-escalation ahead of the Muslim fasting month of Ramadan in March and the Jewish holiday of Passover in April.

But within hours of his appeal, a member of the armed wing of the Palestinian Islamist movement Hamas opened fire outside a Tel Aviv cafe, wounding three people before being shot dead by police.

The shooting took place Thursday night on Dizengoff Avenue, a popular nightlife spot in Israel's commercial capital, where a Palestinian attack killed three people in April 2022.

"I heard gunshots and saw people running away," David Friedmann, a police officer who helped shoot the assailant, told AFP adding that he "ran towards" the scene.

"I fired three rounds at him, (a fellow officer) also fired three rounds, and when he fell, he shot again so he wouldn't get up again," he added.

On Friday morning an Israeli settler shot dead an armed Palestinian attacker at Dorot Illit settlement in the northern West Bank, the Israeli military said.

The West Bank, occupied by Israel since the 1967 Six-Day War, is home to hundreds of thousands of Jewish settlers who live in state-approved settlements considered illegal under international law.

"A terrorist armed with knives and explosive devices arrived at the Dorot Illit area" before the settler spotted the assailant, opened fire, and "neutralized" him, it said, later confirming he had been killed.

The Palestinian health ministry identified him as Abd al-Karim al-Sheikh, 21.

The day after the Tel Aviv shooting, one of the wounded remained in critical condition, said the hospital where he is being treated.

US 'disturbed' by settler violence

Israeli Defence Minister Yoav Gallant said he had ordered the immediate destruction of the Tel Aviv assailant's house in Nilin, near the West Bank city of Ramallah.

Such demolitions take place under a long-standing policy to punish the families of Palestinians who kill Israelis.

Austin held talks in Israel hours after three suspected Palestinian militants were killed in the West Bank and as protesters rallied against Prime Minister Benjamin Netanyahu's hard-right government.

Islamic Jihad and Hamas vowed to avenge the deaths.

Violence intensified last year but has worsened in the West Bank during the tenure of Netanyahu's government which took office in December, a coalition with ultra-Orthodox Jewish and extreme-right allies.

The government of Netanyahu, which is on trial for corruption, has vowed to continue the expansion of West Bank settlements.

About 230,000 Israelis live in annexed east Jerusalem, along with at least 360,000 Palestinians who want to make the sector the capital of their future state.

But Israeli-Palestinian peace negotiations have been stalled since 2014.

Austin had said on Thursday, in a joint news conference with Gallant, that the US commitment to Israel's security was "iron-clad".

But the US remained "firmly opposed to any acts that could trigger more insecurity, including settlement expansion and inflammatory rhetoric," he said, adding: "We are especially disturbed by violence by settlers against Palestinians."

Thousands of Israelis opposed to the Netanyahu government's controversial legal reform plans had blocked roads in and around Ben Gurion airport, near Tel Aviv, forcing a last-minute change of venue for Austin's talks.

The new legislation aims to curtail the powers of the supreme court and give politicians greater powers over the selection of judges, raising concerns that it threatens Israel's democracy.

Since the start of the year, the Israeli-Palestinian conflict has claimed the lives of 77 Palestinian adults and children, including militants and civilians.

Twelve Israeli civilians, including three children, and one policeman, as well as one Ukrainian civilian, have been killed over the same period, according to an AFP tally based on official sources from both sides.