Two people including a child were killed and several injured when a driver rammed his car into a group of people at a bus stop on the outskirts of Jerusalem, Israeli emergency services said.
Prime Minister Benjamin Netanyahu described the incident as a terrorist attack and ordered security forces to be reinforced.
A volunteer medic with United Hatzalah ambulance service, Ariel Ben-David, told Army Radio: "Everyone was lying out, thrown about, in very bad condition. To our regret, one child did not survive."
Police said the driver had been "neutralised" without giving any details.
A man who said he had witnessed the attack from his car told Israel's Channel 12 news an armed civilian had shot the attacker before a police officer arrived and also shot into the car.
The incident occurred during a period of high tension following an attack in which a lone Palestinian gunman shot seven people outside a synagogue last month.
Hardline Security Minister Itamar Ben-Gvir, who is responsible for police forces in the area, visited the scene.
Footage circulated on social media showed a blue car that had crashed into a pole in front of the bus stop in the Ramotarea, a part of Jerusalem that was annexed by Israel after the 1967 Middle Eastern war.
Israeli forces have carried out hundreds of arrests over recent months during near-daily raids in the occupied West Bank that have seen bloody gun battles with Palestinian militants.
More than 35 Palestinians have been killed so far this year.
