JERUSALEM (AFP) - Israel is facing an ongoing wave of terror which is focused on Jerusalem, Prime Minister Benjamin Netanyahu said after an attack on a synagogue on Tuesday killed four rabbis at prayer.

"We are at the height of an ongoing terror attack focused on Jerusalem," Mr Netanyahu said in a live public address just hours after two Palestinian cousins from annexed east Jerusalem staged the attack with meat cleavers and a gun, leaving scenes of carnage.

He warned Israelis against taking the law into their own hands by carrying out revenge attacks, and also pledged to demolish the homes of the assailants who carried out the bloodshed.

"This evening, I ordered the destruction of the houses of the Palestinians who carried out this massacre and to speed up the demolition of those who carried out previous attacks," he said, reiterating a pledge made on Nov 6 just days after a Palestinian rammed his car into pedestrians, killing two in the second such hit-and-run attack in a fortnight.

But Mr Netanyahu also sought to calm tempers, warning Israelis not to take the law into their own hands.

"Citizens of Israel, I call on you to demonstrate great vigilance and to respect the law because the state will bring to justice all the terrorists and those who dispatch them," he said.

"It is forbidden for anyone to take the law into their own hands, even if tempers are high and even if you're burning with anger."

Israel would also "step up enforcement and harshen the penalties" against anyone or any organisation involved in incitement, the premier said.

He linked the attack to inflammatory statements about the flashpoint Al-Aqsa mosque compound made by the Palestinian Authority, the Islamist Hamas movement and Israel's Islamic Movement, a religious advocacy group.

Known to Jews as the Temple Mount, the mosque compound is sacred to both faiths and one of the most sensitive sites in the Middle East.

"Hamas, the Islamic Movement and the Palestinian Authority are spreading no end of libels... against the state of Israel," he said.

"They say that the Jews are defiling the Temple Mount, they say that we are planning to destroy the holy places there, that we are intending to change the prayer rites there.

"It's all a lie. And these lies have already cost a very high price," he said, listing the Israeli victims of recent Palestinian attacks in Jerusalem.

"Today more victims were added to their number due to this crazy blood libel."