Two of the victims were in serious condition, including a pregnant woman with abdominal injuries and a man with gunshot wounds to the head and neck, according to Israeli hospitals treating them.

The shooting late on Sunday occurred as the bus waited in a car park near the Western Wall, which is considered the holiest site where Jews can pray.

Israeli security forces pushed into the nearby Palestinian neighbourhood of Silwan pursuing the suspected attacker.

The attack in Jerusalem followed a tense week between Israel and Palestinians in Gaza and the West Bank.

Last weekend, Israeli aircraft unleashed an offensive in the Gaza Strip targeting the militant group Islamic Jihad and setting off three days of fierce cross-border fighting.

Islamic Jihad fired hundreds of rockets to avenge the air strikes, which killed two of its commanders and other militants.

Israel said the attack was meant to thwart threats from the group to respond to the arrest of one of its officials in the occupied West Bank.

Forty-nine Palestinians, including 17 children and 14 militants, were killed, and several hundred were injured in the fighting, which ended with an Egyptian-brokered ceasefire.

No Israeli was killed or seriously injured.

The Islamic militant group Hamas, which controls Gaza, stayed on the sidelines.

A day after the ceasefire halted the worst round of Gaza fighting in more than a year, Israeli troops killed three Palestinian militants and wounded dozens in a shootout that erupted during an arrest raid in the West Bank city of Nablus.

Australian Associated Press