Palestinian gunmen on Thursday opened fire at a Likud Party office crowded with voters and at passengers in a nearby bus terminal in the northern Israeli town of Beit Shean, not far from the Jordanian border.
At least six Israelis and two attackers were killed. Dozens were wounded.
A militant group linked to Palestinian President Yasser Arafat's Fatah faction claimed responsibility for the attack. The al-Aqsa Martyrs Brigades said its gunmen carried out the raid to avenge the killings on Tuesday of two militant commanders in the Jenin refugee camp in the West Bank.
Thursday's attacks came on the day of an election contest between Prime Minister Ariel Sharon and Foreign Minister Benjamin Netanyahu.
The gun battle erupted on the street, with police and armed bystanders firing at the attackers. Two gunmen were killed and a third was holed up in a house opposite the Likud branch, occasionally firing at the office. Security forces surrounded the house. One of the gunmen reportedly fled to a nearby bus station.
One of the attackers carried an explosives belt that did not go detonate.
"There are dead here," witness Yitzhak Avraham said, adding that grenades were thrown by the assailants.
Police also found a stolen car near the bus station and were checking it for explosives, radio reports said.
A woman who saw the 3 p.m. attack from her home near the Likud office described seeing one gunman in a military-style jacket firing on people as they fled.
"I simply saw the terrorist standing, smiling, laughing and shooting in all directions," Galit Cohen told Israel Army Radio. "He simply shot and shot and shot and he didn't stop. People were fleeing and falling."
"They fired hundreds of bullets," Beit Shean Mayor Pini Caballo told Israel Radio. "They went to the Likud branch and saw the crowds and fired in all directions and hit many people."
Rafi Ben-Shetreet, the Likud leader in Beit Shean, said he and others standing at the entrance to the party office heard what sounded like two grenade blasts followed by bursts of shooting. One of the attackers was killed by a security guard, he said.
A Palestinian Cabinet minister, Ghassan Khatib, said Israel's occupation of the West Bank and Gaza Strip "is responsible for the continuation of the violence" and both sides should avoid harming civilians.
David Baker, an official in Sharon's office, said, "Israel is fighting a day-to-day battle against those who reject our very existence and want us out of Israel once and for all."
One presumption is that the simultaneous attacks in Africa at a Kenya hotel and an Israeli aircraft were supposed to coincide with Thursday's elections as a way for Usama bin Laden, Al Qaeda and Islamic extremists to send a message of support to the Palestinians.
Experts are wondering what, if any, the attacks will have on the elections. Sharon was ahead by about 20 points.
The Associated Press contributed to this report.