A Palestinian with a history of anti-Israel violence slammed his car into a crowded railway station in Jerusalem, killing a three-month-old baby girl and injuring eight people in what police called a terror attack.

The girl and her parents, who were injured in the attack, were US citizens and the violence came after months of tensions between Jews and Palestinians in east Jerusalem - the section of the city the Palestinians demand as their future capital.

The area has experienced unrest and near-daily attacks on the city's light rail by Palestinian youths since a wave of violence over the summer, capped by a 50-day war between Israel and Hamas militants in Gaza.

Police spokesman Micky Rosenfeld said the driver got out of the car and tried to flee before he was shot by a police officer.

He said footage captured by security cameras indicated the driver deliberately struck people waiting at the stop.

Mr Rosenfeld said the driver, from the east Jerusalem neighbourhood of Silwan, was in a serious condition. He added he "has served time in Israeli prison for terrorism".