The gunman was shot dead by a seminary graduate who is an army officer and lives nearby, Mr David Simchon, head of the seminary's high school, said yesterday.

Police spokesman Micky Rosenfeld said the attacker walked through the seminary's main gate and entered the library, where witnesses said some 80 students were gathered.

He carried an assault rifle and a pistol, and used both weapons in the attack. Students scrambled to flee the attack, jumping out of windows.

Mr Rosenfeld said at least six empty ammunition magazines were found on the floor. One of the students who died was 26 years old and the rest were teenagers aged between 15 and 19.

Rescue workers said nine people were wounded, three seriously. Mr Rosenfeld said that 'a car directly linked to the terrorist' was found in Jerusalem and that 'an investigation is continuing'.

It was the deadliest attack in Israel since a suicide bomber killed 11 people in Tel Aviv on April 17, 2006. It is also the first major attack in Jerusalem in four years, prompting Israel to go on an alert.

After the attack, the Jewish seminarians gathered outside the library and screamed for revenge, shouting, 'Death to Arabs', while in Hamas-controlled Gaza, thousands of jubilant Palestinians took to the streets to celebrate.

Israeli defence officials said the attacker came from east Jerusalem, home to Palestinians who hold Israeli identity cards that give them freedom of movement in Israel, unlike Palestinians in the West Bank and Gaza.

Several residents of the east Jerusalem neighbourhood of Jabel Mukaber gave the gunman's name as Alaa Abu Dheim, 25, and said he had worked as a driver at the seminary.

Police arrested more than 10 of his relatives and friends yesterday. His family had set up a mourning tent and hung green Hamas flags outside their home.

Palestinian President Mahmoud Abbas, with whom Israel is negotiating a peace deal, condemned the attack.

Yesterday morning there were some Israeli lawmakers calling on the government to break off talks. But others rejected that call, saying Israel should not be dragged into a cycle of violence.

Hamas militants praised the attack in a statement but stopped short of claiming responsibility. 'We bless the operation. It will not be the last,' Hamas said in a statement sent to reporters.

ASSOCIATED PRESS, AGENCE FRANCE-PRESSE