At least eight people were killed and 10 others injured in a shooting attack in a settlement in East Jerusalem on Friday night, the Israeli Foreign Ministry said in a tweet.
According to Israel's Magen David Adom emergency service, several people were being treated for life-threatening injuries and the assailant had been shot dead.
Israeli media reported that the attack began at a synagogue before spreading to a street in the neighbourhood, Xinhua news agency reported.
The incident came hours after Palestinian militants from the Gaza Strip fired rockets into Israel, which retaliated by launching airstrikes. No casualties were reported yet.
Tensions have been high since Israeli forces killed nine Palestinians, including a 61-year-old woman, in a raid in the Jenin refugee camp in the occupied West Bank on Thursday. Israel said the raid was carried out to foil "a terror squad" that planned an attack against Israelis.