The gunfire threatened to rekindle daily Israeli-Palestinian bloodshed after a brief period of relative calm. A senior Israeli official said that understandings reached last week toward calming the violence were no longer in effect because of Palestinian attacks, and that Israel would respond.
The bus stop attack took place after nightfall in Neve Yaakov, a Jewish neighborhood in a disputed part of Jerusalem claimed by both sides. At least one Palestinian started shooting at Israelis, wounding eight people, including three policemen, police and witnesses said.
Eyewitness Yulia Kizgila, 23, saw the gunman. "He ducked behind a car and fired," and police fired back, she said. The car was riddled with bullets and the street was smeared with blood.
Police charged the attacker and shot him, said Jerusalem police commander Mickey Levy. At first police said there were two gunmen and one was killed. Later they said one was critically wounded, and two hours after the incident they said there was only one attacker.
In Nablus, the Al Aqsa Brigades said the attacker belonged to the group, linked to Palestinian leader Yasser Arafat's Fatah movement. The organization also claimed responsibility for another attack on Israelis on Monday.
Earlier in the day, Israel pulled back the tanks surrounding Arafat's West Bank compound. Angry Palestinian officials said the move was meaningless because of the continued restrictions on Arafat's movements.
The day's violence began in the West Bank, where two Palestinians were shot and killed by Israeli troops in separate confrontations at military checkpoints. Shortly before the bus stop attack, two Israelis died in a gunfire attack at a roadblock near the isolated Jewish settlement of Nokdim, south of Bethlehem.
One of the Palestinians killed was taking his pregnant wife to the hospital in Nablus. The woman, who was slightly injured, gave birth to a girl shortly after her husband died. It was the second day in a row a pregnant Palestinian woman heading to the hospital was wounded by Israeli gunfire at the same checkpoint.
In both shootings, the Israeli military said soldiers opened fire after the cars ignored orders to stop and tried to drive around the roadblock. Israeli soldiers at checkpoints have been especially wary since six soldiers were killed by Palestinian gunmen in a roadblock attack last week outside the West Bank city of Ramallah.
In the nighttime attack in which two Israelis were killed, a pregnant Jewish woman was seriously wounded and gave birth to a healthy baby. One other person was injured in the shooting, for which the Al Aqsa Brigades claimed responsibility. In another attack, near Hebron, a 16-year-old Israel boy was seriously wounded, the military and Jewish settlers said.
Also Monday, a Palestinian girl was killed when she ran toward an army checkpoint near Tulkarem brandishing a knife, the army said. Soldiers shot her after calling on her to stop and firing warning shots in the air, the army said.
The girl's father, Jamal Shalhoub, said his 16-year-old daughter, Noura, had been deeply affected by the violence and that apparently moved her to attempt an attack on Israeli soldiers.
Israel, which has kept Arafat confined to Ramallah for nearly three months, withdrew tanks early Monday that had been about 100 yards outside his government compound.
However, Israeli troops will remain posted around the city's perimeter, the army said, and Arafat will not be allowed to leave the city.
The Palestinians had hoped last week's arrests of three top suspects in the October killing of an Israeli Cabinet minister might end Arafat's confinement. But Israel demanded that they be handed over to Israeli authorities and that other suspects be arrested as well.
Israel will hit back for the latest Palestinian attacks, said Raanan Gissin, a spokesman for Prime Minister Sharon. He said understandings reached Thursday in a meeting of security commanders are off. Israel removed some roadblocks and withdrew from some positions in Gaza, and the Palestinians pledged to work for an end to the attacks.
Now, Gissin said, "it is clear that the other side planned to renew the violence." He said Israel would retaliate in what he called a "measured response."
Diplomatic efforts continued amid the violence. U.S. Secretary of State Colin Powell encouraged Crown Prince Abdullah of Saudi Arabia to keep working on his peace proposal and drew support from the European Union in urging Arafat to curb violence.
"We share the same concerns about the terrible situation in the Middle East, and all of our exchanges have led to a complete agreement in point of view," Spanish Foreign Minister Josep Pique said after talking to Powell.
Spain is currently president of the European Union.
It is very important to reduce the violence, increase security and "for the Palestinian Authority to make all efforts necessary to cut back violence,' Pique said.
But he tempered his demand with the observation that making a 100 percent effort depends on a "100 percent capacity" a reference to Israel's restrictions on Arafat.
Powell made a round of calls Sunday to try to halt the fighting. He spoke to the Saudi crown prince, Sharon, Arafat, King Abdullah II of Jordan, Foreign Minister Ahmed Maher of Egypt and Javier Solana, the EU's senior diplomat, who is in the area.
The aim, Powell said, "is to find our way out of this terrible situation."
The Saudi proposal offers recognition, trade and security to Israel in return for giving up the West Bank, Gaza and part of Jerusalem.
"I think it's an important step that we have welcomed," Powell said. "I wanted to shar with the Crown Prince our reaction to his idea and hope that in the weeks ahead it will be flushed out in greater detail."