A settler killed an alleged assailant in the occupied West Bank on Friday after a gunman wounded three people in Tel Aviv, in a surge of Israeli-Palestinian violence that shows no sign of abating.

Tensions remained high a day after Pentagon chief Lloyd Austin had, on a visit to Israel, called for de-escalation ahead of the Muslim fasting month of Ramadan in March and the Jewish holiday of Passover in April.

But within hours of his appeal a member of the armed wing of the Palestinian Islamist movement Hamas opened fire outside a Tel Aviv cafe, wounding three men in their 30s before being shot dead by police.

"I heard gunshots and saw people running away," David Friedmann, a police officer who helped shoot the assailant, told AFP adding that he "ran towards" the scene.

"I fired three rounds at him, (a fellow officer) also fired three rounds, and when he fell, he was shot again so he wouldn't get up again," he added.

On Friday morning an Israeli settler shot dead an armed Palestinian attacker at Dorot Illit settlement in the northern West Bank, the army said.

Occupied by Israel since the 1967 Six-Day War, the West Bank is home to hundreds of thousands of Jewish settlers who live in state-approved settlements considered illegal under international law.

"A terrorist armed with knives and explosive devices arrived at the Dorot Illit area" before the settler spotted the assailant, opened fire and "neutralised" him, the army said, later confirming he had been killed.

The Palestinian health ministry identified him as Abd al-Karim al-Sheikh, 21.

- 'Senseless act' -
 

The day after the Tel Aviv shooting, Israeli police said they arrested two Arab Israelis suspected of helping the gunman, 23-year-old Mutaz Khawaja.

One of those wounded in that attack remained in critical condition, said the hospital where he is being treated.

Israeli Defence Minister Yoav Gallant said he had ordered the immediate destruction of the Tel Aviv assailant's house in Nilin, near the West Bank city of Ramallah.

Such demolitions take place under a long-standing policy to punish the families of Palestinians who kill Israelis.

The European Union condemned the Tel Aviv shooting, saying "this senseless act demonstrates once again how urgent it is to stop the cycle of violence and de-escalate the situation".

At a rally Friday in the Gaza Strip, Hamas official Mushir al-Masri, whose group rules the territory, praised the "swift response in the heart of Tel Aviv to avenge crimes" of Israel in Jenin, a West Bank city that has been the scene of recurring violence.

Austin held talks in Israel hours after three suspected Palestinian militants were killed in the West Bank and as protesters rallied against Prime Minister Benjamin Netanyahu's hard-right government.

Violence intensified last year but has worsened in the West Bank during the tenure of Netanyahu's government which took office in December, a coalition with ultra-Orthodox Jewish and extreme-right allies.

The government of Netanyahu, who is on trial for corruption, has vowed to continue the expansion of West Bank settlements.

- Stalled peace talks -
 

About 230,000 Israelis live in annexed east Jerusalem, along with at least 360,000 Palestinians who want to make the sector the capital of their future state.

But Israeli-Palestinian peace negotiations have been stalled since 2014.

Austin had said Thursday the US commitment to Israel's security was "iron-clad".

But the US remained "firmly opposed to any acts that could trigger more insecurity, including settlement expansion and inflammatory rhetoric," he said, adding: "We are especially disturbed by violence by settlers against Palestinians."

Thousands of Israelis opposed to the Netanyahu government's legal reform plans had blocked roads in and around Ben Gurion airport, near Tel Aviv, forcing a last-minute change of venue for Austin's talks.

The new legislation aims to curtail the powers of the supreme court and give politicians greater powers over the selection of judges, raising concerns that it threatens Israel's democracy.

Since the start of the year, the Israeli-Palestinian conflict has claimed the lives of 77 Palestinian adults and children, including militants and civilians.

Twelve Israeli civilians, including three children, and one policeman, as well as one Ukrainian civilian have been killed over the same period, according to an AFP tally based on official sources from both sides.