The unidentified gunman killed at least two people and wounded three others near the center of town before fleeing the scene.

Nati Shakked, owner of the Simta bar, which was hit by gunfire, said the assailant sat waiting on a bench outside the premises before removing a machine-gun from a bag and “shooting in every direction.”

Witnesses told the Times of Israel newspaper that about 10 shots were fired. Special forces are searching for the person responsible.

Mayor Ron Chuldai said the motive for the attack was unclear, but authorities were assuming it was a terrorist attack, sentiment shared by Shakked.

“It was a terrorist attack, without a doubt,” he told Israel's Channel Two television station.

Tel Aviv, Israel's commercial capital has seen an increase in Palestinian street attacks since October, fuelled in part by Muslim anger over increased Jewish visits to Jerusalem's al-Aqsa mosque which is also sacred to Jews, as well as long-stalled peace talks.

More than 20 Israelis and 140 Palestinians have died in the past three months as a result of the increased violence.

jlw/jil (dpa, Reuters)