A gunman who killed at least two people after opening fire on a tourist hotspot in Tel Aviv has been shot and killed in a shoot-out with Israeli police.
The shooter entered a bar in the main boulevard and fired his weapon randomly at bystanders before escaping on foot, said police in the Israeli capital.
Large numbers of emergency teams arrived on the scene in Disengoff Street as police urged people to stay indoors as they frantically searched for the armed man.
Terrifying pictures from the scene showed armed police aiming their guns towards the upper storey as teams searched building by building for the shooter.
A hospital official confirmed at least two people had died while at least four of the 12 reported wounded were said to be in critical or serious condition, according to Sourasky Medical Center.
Television footage showed armed police running up and down the crowded street of bars and restaurants as they attempted to track down the attacker while a helicopter shined search lights from above.
Local reports suggest as many as 1,000 police officers joined the hunt for the shooter, said to have been wearing black shorts and matching shirt.
It was later confirmed by the Shin Bet security agency that the shooter had been killed in a gunfight with police.
The area where the attack took place was packed with people eager to celebrate the start of the Israeli weekend.
Police spokesman Eli Levy said on Channel 13 television: “A terrorist opened fire at short range and then fled on foot. Several people are wounded.
“Don't leave your homes. Don't stick your heads out of the window. Stay off your balconies."
The motive for the shooting is unclear but the attack is the latest in a string of similar incidents over the last month in which 11 people were killed ahead of the holy Islamic month of Ramadan, which started a week ago.
The Palestinian Islamist group Hamas praised the attack, , describing it as a "natural and legitimate response to the escalation of the occupation's crimes against our people, our land, Jerusalem and al-Aqsa Mosque."
No one has yet claimed responsibility.
Israeli Prime Minister Naftali Bennett was briefed throughout the night on the attack and the search for the gunman who is reported to have been killed by police in nearby Jaffa.
Security forces said that the shooter was hiding in a Jaffa mosque and was from the Jenin district of northern West Bank.
Mark Malfiev, 27, was among those injured in the terror attack, as he was shot in the back while as he was passing by.
He added from his hospital bed: “I saw the window shatter, people suddenly started running, and I felt getting hit in the back.
“I felt a lot of blood. I saw blood."
U.S. Ambassador Tom Nides said on Twitter: “Horrified to see another cowardly terror attack on innocent civilians, this time in Tel Aviv.
“Praying for peace, and sending condolences to the victims and their families.
“This has to stop.”
Barman Koby Brinn told the Jerusalem Post: "It was nuts. I was at the bar that faced outside, and suddenly there was this massive wave of people running in the street."
Last year, protests and clashes during Ramadan ignited an 11-day Gaza war.
In March a gunman killed at least five people when he opened fire in a random attack on a busy street in Tel Aviv before he was shot dead by armed police.
Footage shows the suspected terrorist walking down a street with a gun firing at passers-by including a car and a person on a bike in Bnei Brak, an ultra-orthodox suburb of the Israeli city.
Prime Minister Naftali Bennett tweeted after the shootings to say: "Israel is facing a wave of murderous Arab terror."
In other attacks an Arab citizen of Israel killed four people in a stabbing and car ramming attack in the southern city of Beersheba, before he was shot dead by a passerby. Israeli authorities said he was an Islamic State sympathiser.
On Sunday, as an Israeli-Arab summit convened in southern Israel, an Arab assailant shot and killed two police officers in Hadera, a city some 50 km (30 miles) north of Tel Aviv. Other officers shot and killed him.
Islamic State claimed responsibility for the Hadera attack.
The road has been the scene of several atrocities over the years.
Most recently, an Arab citizen of Israel shot and killed two Israelis and wounded several others on the street in January 2016.