Palestinian men armed with knives and a gun killed at least three people and wounded several others in a string of attacks in Jerusalem and near Tel Aviv on a "Day of Rage" declared by Palestinian groups.

With the worst unrest in years in Israel and the Palestinian territories showing no signs of abating, Prime Minister Benjamin Netanyahu called a security cabinet meeting to discuss what police said would be new operational plans.

One option would be to seal off Palestinian neighbourhoods in East Jerusalem, home of many of the assailants of the past two weeks, from the rest of the city.

Unlike their brethren in the occupied West Bank, Palestinians in East Jerusalem can travel in Israel without restrictions. Israel annexed East Jerusalem after a 1967 war in a move that is not recognised internationally.

Adding to a growing sense of Israeli public insecurity, two Palestinians shot and stabbed passengers on a bus in Jerusalem, killing two and injuring four, police said. One of the assailants was killed, an ambulance service spokesman said, and the other captured.

Minutes later, another Palestinian rammed his car into a bus stop in the centre of Jerusalem, then got out and began stabbing pedestrians, killing one and wounding six, police said.

Seven Israelis and 27 Palestinians, including nine alleged attackers and eight children, have died in almost two weeks of street attacks and security crackdowns.

The violence has been stirred in part by Muslim anger over increasing Jewish visits to the al-Aqsa mosque compound in Jerusalem, Islam's holiest site outside the Arabian Peninsula.