Police in Jerusalem have vowed "zero tolerance" towards any act of violence after the death of a baby girl who was struck by a car.
Eight other people were hurt when a man "rammed" a group of pedestrians at a Jerusalem light railway stop.
Police spokesman Micky Rosenfeld said it was a "terrorist attack" and that the driver, a Palestinian man of east Jerusalem, had served time in prison for "terror activity".
They said they shot the man, identified as Adbel-Rahman Shaloudi, 21, as he fled and a hospital official said the driver later died of his injuries.
Police deployed extra forces into the area to confront one of the worst spikes in violence in weeks in a city at the heart of the Israeli-Palestinian conflict.
In Washington, the US State Department said the baby was "reportedly an American citizen," but did not elaborate.
Silwan, a neighbourhood bordering on Jerusalem's old walled city, has been a focal point of violence in past weeks with Palestinians protesting against Israeli settlers moving into houses in the predominantly Palestinian-populated district.
After nightfall, Silwan residents clashed with police, who responded to rocks and petrol bombs with stun grenades.
Police clashed with stone-throwing protesters elsewhere in the city as well, where one person was injured and two others were arrested.
No group claimed responsibility for the attack.
