It was not immediately clear what caused the explosion. Witnesses said they saw a flash in the sky and then the motorcycle exploded, indicating an Israeli missile strike. The residents said they did not see any Israeli helicopters in the sky, though they heard an unmanned Israeli plane.
The Israeli military refused to comment.
Hospital officials said two dead and seven slightly wounded, including a woman and two children, were brought in. They did not immediately identify the dead, but residents said the target was apparently Wael Nassar, 38, a senior Hamas commander. They said he has been on Israel's wanted list for 14 years.
The explosion came from the Zeitoun neighborhood, scene of heavy fighting between Israeli forces and Palestinians earlier this month, after Palestinians blew up an Israeli armored personnel carrier, killing six soldiers.
In other violence Saturday, a Palestinian gunman killed an Israeli soldier in the Balata refugee camp, near the northern West Bank city of Nablus.
Meanwhile, Israeli Prime Minister Ariel Sharon geared up for a head-to-head clash with hard-liners in his Cabinet over his Gaza pullout plan, hoping the heated debate would win him a government majority for the U.S.-endorsed proposal, officials said Saturday.
Preparing for what was expected to be a long, contentious meeting, Sharon holed up Saturday at his ranch in southern Israel and took the opportunity to slam his rivals in an interview with Israel Radio.
In the stinging interview, Sharon accused unnamed Cabinet ministers of "extortion" and seeking personal political advancement at the country's expense. He appeared to be taking aim at his greatest adversary, Finance Minister Benjamin Netanyahu.
A government official, speaking on condition of anonymity, said Sharon might talk to Cabinet members later Saturday in a final effort to shore up support for the plan, but ruled out any behind-the-scenes wheeling and dealing during Sunday's Cabinet session.
Sharon will ask the 23 Cabinet ministers to debate a "phased disengagement plan" that calls for the evacuation of all Gaza Strip and four West Bank settlements. Except for minor changes, the plan is almost identical to one vetoed by Sharon's hard-line Likud Party in a referendum earlier this month.
Attempts to find a compromise that would have won him a Cabinet majority failed. So Sharon decided that if the plan was going to bring down his government he wasn't going to water it down.
However, Sharon "doesn't want to do it as a rebellious move but rather get it passed," an adviser, who spoke on condition of anonymity, said. Since most ministers don't want to see the government collapse, it is likely constructive ideas will result from Sunday's debate, he added.
The conflict over the plan has led to sharp confrontations between longtime adversaries Sharon and Netanyahu, with anonymous confidants trading insults in the media.
Netanyahu originally expressed support for the plan when Sharon returned from a White House meeting with President Bush with unprecedented U.S. commitments in exchange for an Israeli withdrawal.
After Sharon lost the Likud referendum, Netanyahu decided to oppose the plan in the Cabinet, leaving the prime minister one vote short of victory.
The United States and Egypt, meanwhile, keen supporters of the proposal, are waiting for Sharon to make a move. Due to the pullout plan, Bush backed Israel's desire to hold onto chunks of the West Bank under a final peace deal and prevent Palestinian refugees from settling in Israel.
Egypt has pledged to assist in training and reforming Palestinian security forces in the Gaza Strip.
On Saturday, Samara Masharwi, a senior official in Yasser Arafat's Fatah movement, said the first Egyptian team would arrive in Gaza on June 17 to begin "rehabilitating" the Palestinian forces. Other officials said the date could change if Sharon does not bring the plan to a vote on Sunday.
Sharon fears a watered-down plan would not have strong U.S. and Egyptian backing, key to a successful implementation, the prime minister's adviser said.
In addition, Sharon is looking to the future and a possible early election if he doesn't get Cabinet and parliament support for the pullout. Polls have shown that a majority of Israelis support the plan and want to evacuate Gaza Strip settlements.
Political analysts said Saturday that Sharon is not eager to go to an early election - partly because he would likely have to compete against Netanyahu in a Likud primary - but would prefer to reshuffle his Cabinet to include the center-left Labor Party.
Sharon's adviser said Labor had indicated it would be willing to join the coalition if the prime minister was serious about evacuating settlements.