Tel Aviv suicide bomb kills nine
The militant group Islamic Jihad said it was behind the restaurant blast, but Israel said it held the Hamas-led Palestinian Authority responsible.
However, Hamas, which has been keeping a truce with Israel, described the attack was an act of self-defense.
Palestinian leader Mahmoud Abbas condemned the bombing, saying it ran counter to Palestinian interests.
The bombing came shortly before Israel's new parliament was sworn in.
Acting Prime Minister Ehud Olmert said Israel would "act with all means at (its) disposal" to prevent further attacks.
It was lunchtime when the bomb went off on a crowded street near a bus station in Tel Aviv's Neve Shaanan's area.
Of the injured, some of whom had to be treated on the pavement, 15 are in a serious condition, Israel TV's Channel 2 said. A witness, Moussa al Zidat, said the guard at the falafel restaurant had asked the apparent bomber to open his bag: "I saw a young man starting to open his bag. The guard begins opening the bag, and then I heard a boom."
Islamic Jihad issued a videotape from the West Bank town of Jenin in which it named the bomber as Sami Salim.
His family told the Associated Press news agency that he dropped out of university because his parents could not afford to support him. Reports suggest he was in his late teens or early 20s.
Earlier, a member of another group, al-Aqsa Martyrs' Brigades, told Reuters news agency the attack was to avenge "Israeli massacres" in the Gaza Strip.
Sami Abu Zuhri, the official spokesman for Hamas, said the attack was "a natural result of the continued Israeli crimes" against Palestinians.
"Our people are in a state of self-defense and they have every right to use all means to defend themselves," he added.
Hamas, which has carried out dozens of previous bombings, has been observing a ceasefire with Israel for more than a year.
A bomb injured 15 people near the same falafel stall, The Mayor's Falafel, in January.