Ami Klein, a lawyer who witnessed the explosion from a nearby courthouse, told Israel Radio that the attacker reached the entrance to the mall but wasn't able to enter. "The boom shook the entire courthouse," he said.
Police said seven people were injured critically.
About half an hour after the bombing, the Al Aqsa Martyrs' Brigades – an offshoot of the Fatah wing of the Palestine Liberation Organization – claimed responsibility for the attack.
Police said the bomber blew himself up in a line of people going through a customary security check at the mall's entrance.
Netanya – seen as especially vulnerable because it is close to the West Bank - has been targeted many other times by suicide bombers, including this past July; in March of 2003, a blast claimed by Islamic Jihad; in May of 2002; and in March of 2002, at the Park Hotel.
Monday's attack is the fifth since the cease-fire declaration, and the first suicide bombing in Israel since Oct. 26, when a 20-year-old Palestinian blew himself up at a falafel stand in the town of Hadera, killing five Israelis.
CBS News Correspondent Robert Berger reports Netanya had enjoyed a period of calm, thanks to the Israeli-Palestinian cease-fire, and Israel's security barrier. But attacks like this show that the despite the barrier and tight border security, determined bombers can still get in.
Palestinian negotiator Saeb Erekat condemned the attack. "I believe that this harms Palestinian interests and is another act to sabotage efforts to revive the peace process and to sabotage the Palestinian elections," he said, referring to a parliamentary vote set for January.
The bombing follows growing tensions along Israel's border with the Gaza Strip. Palestinian militants on Sunday fired two rockets from Gaza into Israel at nightfall Sunday, following the first Israeli airstrikes in Gaza in more than a month.