A bomb blast ripped through the front of a crowded commuter bus as it passed the Israeli defense ministry in Tel Aviv during rush hour on Wednesday, injuring 17 people.
A spokesman for Prime Minister Benjamin Netanyahu said Israel had been hit by a "terrorist attack," with Washington calling it "outrageous" and Russia branding it as "criminal".
The Popular Front for the Liberation of Palestine-General Command (PFLP-GC) has claimed responsibility for the attack.
Scenes of panic instantly filled the heart of Israel's commercial capital as medics treated shell-shocked victims while the stricken bus stood in the middle of the street, its windshield shattered by the blast.
"I panicked. I am speechless. This is scary," a 22-year-old waitress called Sigalit told Agence France Presse.
"I am angry. It must stop," said Ilan Klein, a reporter with the Israel HaYom newspaper who lives close to the blast site.
"When it happens downstairs from your apartment, it really makes you think."
The blast struck as U.S. Secretary of State Hillary Clinton was holding talks with Netanyahu in Jerusalem over ways to end a deadly spike in bloodshed in and around Gaza during the past week.
A spokesman for Israel's Magen David Adom emergency services said that of the 17 injured, one person was in moderate to serious condition while three others were in moderate condition.
The blast struck close to the sprawling defense ministry complex, the Kiriya.
The shell of the white city bus -- its windows blown out and blue seats mangled in scenes reminiscent of the 2000-2005 Palestinian intifada -- quickly became the site of a criminal investigation as bomb experts examined its remains.
Huge crowds gathered nearby, many expressing disbelief that after being targeted by rockets fired from Gaza in recent days, this carefree city had now been hit by a bus bombing.
"The threat exists," Israel police chief Yohanan Danino said in a statement. "There are further threats, and we need to keep our alertness at maximum level in these sensitive days," he said.
But in Gaza, there were signs of celebration as Israel's aerial bombing campaign against rocket-firing militants in the enclave entered its eighth successive day, which has so far claimed 147 Palestinian lives, while the rocket fire has killed five Israelis.
"God is great, God is great. An operation in the heart of the Zionist entity," a Gaza City mosque announced through loudspeakers as celebratory gunfire crackled through the city.
And Hamas-owned Al-Aqsa television welcomed the news, saying it was "a natural reply to to the massacre of the Dallu family and the targeting of Palestinian civilians" -- a reference to nine members of a family killed Sunday in an air strike.
The last time Tel Aviv was hit by a bus bombing was in April 2006.
Last year, an explosion at a bus stop in Jerusalem ripped through a bus, killing a British tourist and wounding 30 others.
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