Jerusalem - A Palestinian man killed at least three people and wounded 45 more when he rammed a bulldozer into buses and cars in central Jerusalem on Wednesday before being shot dead by police.

    National police spokesman Micky Rosenfeld described the rampage as a "terrorist" attack by a 30-year-old man from occupied east Jerusalem who was working at a construction site near the busy road where it took place.

    Chaos erupted as the heavy vehicle barrelled along Jaffa Road in the heart of west Jerusalem, ploughing into two crowded public buses, overturning one of them, and ramming other vehicles, reducing one car to a mangled wreck.

    Several people opened fire at the man driving the earthmover and at least two policemen jumped on to vehicle, emptying several rounds into the driver and leaving him slumped over the wheel, according to AFP reporters.

    The attack was the first in Jerusalem since a Palestinian gunmen shot eight Jewish students at a seminary in March and it was not immediately clear if it would have any impact on the faltering Middle East peace process.

    "We have four people dead so far, including the driver of the earthmover, and 45 wounded, three of them seriously," said Yeroham Mendola, a spokeswoman for the Magen David Adom emergency services.

    Israeli authorities said they had received no specific warnings about an impending attack but have since gone on heightened alert.

    Police Commissioner Dudi Cohen told reporters the attack appeared to be a "spontaneous incident" carried out by a father of two who had a criminal past but no known links to armed groups.

    He added however that police were looking into whether he had "received instructions" from others.

    Jerusalem district police chief Aharon Franco said a "large police force" was combing the Arab neighbourhood of Sur Baher where the attacker lived, questioning his family members and neighbours.

    A little-known group calling itself the Imad Mughnieh unit of the Brigades of the Liberators of the Galilee claimed responsibility in a phone call to AFP. The credibility of the claim could not be immediately established.

    The Palestinian movement Hamas which rules the besieged Gaza Strip called the attack "the natural result of continuing Israeli aggression and crimes against our people in the West Bank and occupied Jerusalem."

    But the Islamist group had no immediate information about who was behind the attack, spokesman Sami Abu Zuhri told AFP.

    Ambulances rushed to the scene soon after the attack as police and security guards sealed off the area and pushed bystanders away from an overturned bus, which leaked fuel into a street gutter.

    Witnesses described scenes of mayhem, with security guards and police opening fire on the tractor as it moved down the street past crowds of screaming pedestrians.

    "There were two policemen on the truck and I climbed onto the truck and saw the attacker leaning forward on the steering wheel and driving into another car," said Eli Misrahi, a member of an elite police unit. "Then I fired two rounds and killed him."

    Several dazed people with bloody wounds milled around as sobbing commuters called loved ones on their mobile phones.

    US President George W. Bush called Israeli Prime Minister Ehud Olmert to express his condolences over the "murderous" attack, the premier's spokesman Mark Regev said.

    "Today's terror attack in Jerusalem was an act of senseless murderous violence and those who refuse to condemn it are exposing themselves for what they really are," Regev added.

    Public Security Minister Avi Dichter told reporters the attack would not succeed in severing mostly Arab east Jerusalem from what Israel considers its "eternal, undivided" capital.

    "One must remember that one third of Jerusalem are Arab citizens but all of Jerusalem is Israel's sovereign territory," he said.

    "Whoever thinks that the one third of east Jerusalemites will succeed to sever part of Jerusalem and take it out of Israeli control is wrong."

    Peace talks resumed between Israel and the Palestinians in November but have stalled amid violence in and around the Gaza Strip and continued Jewish settlement building on occupied Palestinian land.

    At least 524 people have been killed since the negotiations resumed, mostly militants in the besieged Gaza Strip, according to an AFP count.