A Palestinian gunman opened fire outside a synagogue in Neve Yaakov, a small, ultra-Orthodox settlement.

The gunman was identified by "Israeli police as a 21-year-old east Jerusalem resident, he fled in a car after opening fire on civilians," police said.

"Police said they chased after the attacker and killed him in an exchange of fire. They also released a photo of the pistol it said was used by the attacker.

While there was no immediate claim of responsibility, a spokesperson for the ruling Hamas militant group in Gaza said the attack was “a revenge and natural response” to Thursday's deadly military raid.

According to the country's foreign ministry, the attack was the deadliest on Israelis since a 2008 shooting killed eight people in a Jewish seminary in Jerusalem.

It was the deadliest attack on Israelis in years and raised the likelihood of more bloodshed.

In the Palestinian city of Ramallah, large crowds cheered and waved Palestinian flags, fired guns into the air, honked horns and distributed sweets."

Prime Minister Benjamin Netanyahu said he had held a security assessment and decided on “immediate actions.”

Crowds outside the Hadassah Hospital in Jerusalem, where some of the wounded were treated, chanted "Death to Terrorists".