One Palestinian man was shot dead and another critically wounded after they stabbed an Israeli police officer in Jerusalem on Thursday evening, the police said, Trend reports citing Xinhua.
The incident took place in East Jerusalem's Old City.
The police spokesman Micky Rosenfeld said in a statement that the officer was injured moderately before the police forces at the scene opened fire at the suspects.
Describing the incident as a "terrorist attack," Rosenfeld said the police have sealed off the exits and entrances of the Old City.
The violence was the latest incident in escalation between Israelis and Palestinians amid the long-stalled peace talks.
A week ago, two Palestinians stabbed to death a 19-year-old Israeli soldier outside his West Bank settlement.
Israel annexed East Jerusalem in the 1967 war and declared the entire city as its eternal indivisible capital in 1980, a move that has never been recognized by most of the international community.