Israeli security forces were still in pursuit of the gunman, who was feared to have hunkered down inside a house in Kibbutz Metzer, a collective farm, early on Monday.

The attack, which began close to midnight on Sunday, came after Israeli troops pulled back from the West Bank city of Jenin after a two-week hunt for suicide bombers ahead of the arrival of a US envoy to pursue a Middle East peace plan.

"There is an attack by terrorists in the kibbutz and searches are underway," a police spokesman said.

At least five people in the kibbutz were killed, police sources and medics said.

"We are all closed up in our houses. We heard the shots and turned off the lights and shut the doors," kibbutz resident Oded Shahar told Israeli Channel Two television.

Israeli military sources said rockets from a military helicopter destroyed a metal foundry believed to be making mortar bombs in Gaza City early on Monday. No injuries were reported.

Earlier on Sunday, police had erected a checkpoint near Metzer, after receiving information of a potential attack being launched from the Palestinian city of Nablus.

Two Palestinians inside a car apparently blew themselves up after border police spotted what they said was a "suspicious looking" vehicle and asked the driver to pull over, police said. There were no other injuries.

Israeli media said one of the men was wearing an explosives belt, while the second detonated a booby-trapped bag. Television footage of the scene showed the skeletal remains of their vehicle, with a pair of black shoes next to it.

Israelis blame "terrorists"

Palestinian suicide attacks have killed scores of Israelis in a two-year-old Palestinian uprising for statehood. Militants say the attacks are to avenge Israeli military raids in which Palestinian civilians and combatants are killed.

"Once again the bloody hand of Palestinian terror has lashed out at Israeli civilians, this time in their own homes," David Baker, an official in Prime Minister Ariel Sharon's office, said of the Metzer attack.

At least 1,653 Palestinians and 626 Israelis have been killed since the Palestinian uprising erupted in September 2000 after peace talks froze.

US Assistant Secretary of State David Satterfield -- whose exact travel plans have not been disclosed -- was due in the region this week to promote a "roadmap" to peace and Palestinian reforms which Washington has demanded as a prelude to statehood.

The peace proposal, part of efforts by US, European Union, United Nations and Russian mediators, has drawn reservations from Palestinian officials and Israeli cabinet ministers.

The proposal calls for an end to armed Palestinian attacks, Israeli army withdrawals from reoccupied Palestinian cities, talks toward a final peace settlement, and a Palestinian state in the West Bank and Gaza Strip by 2005.

Palestinian ministers said the plan should define a stricter schedule, clearly call for an end to Jewish settlement building on occupied land and send international monitors to the region.

Prime Minister Ariel Sharon choked off criticism of the plan in his right-wing government, refusing to allow a debate on the subject during Sunday's cabinet meeting, apparently to avoid a clash with the United States before a possible war on Iraq.

Ministers criticize US plan

Foreign Minister Benjamin Netanyahu and Defense Minister Shaul Mofaz, Sharon's two newest cabinet additions after the collapse of his broad-based coalition 11 days ago, have both criticized the proposal.

Mofaz believes the plan does not appropriately address Israel's security concerns, political sources said.

Netanyahu has opposed a fully fledged Palestinian state, but has said he would not push the government to change its policy on peace talks before a general election expected in late January.

Netanyahu has said he would challenge Sharon in a Likud leadership election set for November 28.

In Cairo, officials from Palestinian President Yasser Arafat's Fatah faction and the militant Islamic group Hamas met on Sunday as part of a series of talks to iron out tensions between them and discuss ending suicide attacks inside Israel.

Israeli armor took up new positions in Jenin's outskirts on Sunday two weeks after rumbling into the city with hundreds of infantry to mount house-to-house searches for militants.

Palestinian children attended school for the first time in two weeks in Jenin as a curfew was lifted.

An Israeli army commander said 55 Palestinian militants and three would-be suicide bombers were detained in the Jenin offensive, which followed a bombing which killed 14 Israelis.

(China Daily November 11, 2002)