At least seven people have been killed by gunmen who are reported to have infiltrated and attacked a Jewish seminary in West Jerusalem.
Israeli emergency services say at least six people were injured in the attack at the Mercaz Harav seminary in the Kiryat Moshe quarter of Jerusalem.
Reports said one attacker was killed and police were hunting another.
It is the worst attack of its kind for a number of years. There were no attacks within Jerusalem during 2007.
The gunmen are said to have entered the building at the rabbinical seminary, where about 80 people were gathered.
Yaron Tzuker, a medic, said he arrived as the gunfire was still going on.
"They were still shooting when we got here," he told Channel 10 television.
"We took cover and the ambulance was hit. It's horrible inside - dead bodies and wounded - it's horrific."
Hamas praise
The school is a well-known centre for Jewish studies and most students are aged between 18 and 30.
DEADLY ATTACKS IN ISRAEL
4 Feb 2008: One dies, Dimona suicide bombing
29 Apr 2007: Three die, Eilat suicide bombing
17 Apr 2006: Nine die, 40 wounded, suicide bombing near old bus station in Tel Aviv
30 Mar 2006: Four die, Kedumim suicide bombing
29 Dec 2005: Thee die, suicide bombing near Tulkarm
5 Dec 2005: Five die, Netanya suicide bombing
26 Oct 2005: Six die, Hadera market suicide bombing
12 July 2005: Two die, Netanya suicide bombing
25 Feb 2005: Five die, 50 hurt, suicide bombing outside Tel Aviv nightclub
13 Jan 2005: Six die, suicide bombing at Karni crossing
It is said to identify with the leadership of the Jewish settlement movement - who believe the West Bank should be in Jewish and not Palestinian hands.
There were reports of celebratory gunfire in Gaza after news broke about the attack.
Hamas officials in Gaza welcomed the attack but stopped short of admitting responsibility.
The BBC's Crispin Thorold says this will be a particularly shocking incident for the Israeli public and Jewish people around the world - which comes at an extremely tense time.
Israel, he says, is likely to take retaliatory action.
Last week, Israeli forces launched a raid into northern Gaza in which more than 120 Palestinians - including many civilians - were killed.
Israel says the measures are designed to stamp out frequent rocket fire by Palestinian militants.
Recent rocket attacks have hit deeper into southern Israel, reaching Ashkelon, the closest large Israeli city to the Gaza Strip.
Gunmen kill seven in Israel
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