At least eight people have been killed after gunmen opened fire at a rabbinical seminary near Jerusalem.
Ambulances from around the city raced to the scene, where a further 35 people are reported to have been wounded.
"We have counted eight dead and 35 wounded," an official of the Magen David Adom rescue service, equivalent to the Red Cross, told army radio.
Witnesses said gunmen infiltrated a dining hall at the Mercaz Harav yeshiva in the Kiryat Moshe quarter of the city, where around 80 people were gathered.
Initial reports said the men had opened fire "indiscriminately".
The seminar is a well-known centre of Jewish studies and is identified with the leadership of the Jewish settlement movement in the West Bank.
"There are at least seven killed and 10 people wounded," said Eli Dein, director of Israel's rescue service.
Medic Yaron Tzuker said he arrived as the gunfire was still going on. "They were still shooting when we got here. We took cover and the ambulance was hit. It's horrible inside - dead bodies and wounded - it's horrific."
Jerusalem police spokesman Shmuel Ben Ruby said, "One or two terrorists infiltrated the Mercaz Harav seminary and opened fire in all directions. One terrorist was killed in an exchange of fire."
He added that the dead gunmen was wearing a vest at first thought to be explosives, but that it was later found to contain ammunition.
He said students had been evacuated from the building and that police were searching from room to room.
Jerusalem Mayor Uri Lupolianski said: "It's very sad tonight in Jerusalem - many people were killed in the heart of Jerusalem."
In Gaza City, residents went out into the streets and fired rifles in celebration in the air after hearing news of the attack on the seminary.
Between 2001 and 2004, Jerusalem was a frequent target for Palestinian terrorist attacks, although there have been no incidents in the last year.
There has been no immediate claim for the shootings but the Palestinian Hamas movement has praised the attack.
Hamas spokesman Sami Abu Zuhri said: "This heroic attack in Jerusalem is a normal response to the crimes of the occupier and its murder of civilians."