Three bystanders have been killed and at least 30 injured in two explosions in the Israeli coastal city of Tel Aviv.

Israeli police say the explosions were carried out within seconds of each other by two Palestinian suicide bombers who also died.

Both explosions occurred about 15 metres apart in Neve Shaanan Street, an area crowded with small shops and stalls close to the old Tel Aviv bus station.

One report said an explosion appeared to have gone off in a small cafe near a cinema.

The run-down area is known for its large number of foreign workers and at least one of the dead is a foreigner, police said.

It appears they were carrying the explosive in a bag which they activated with some sort of wire

Tel Aviv police chief Yossi Sedbon

One witness, Dutzu Raduyan, said: "It was horrible, dead people were everywhere and the injured were screaming.

"I've never seen such a thing in my life."

Israel blamed Yasser Arafat's Palestinian Authority for the attack and the Defence Ministry said that plans to ease trade restrictions on the crippled Palestinian economy would now be frozen.

"This attack in Tel Aviv proves that Palestinian terrorists are determined to murder, maim and terrorise as many Israelis as they can, thinking that by doing so they can pressure Israel into concessions," David Baker, spokesman for Israeli Prime Minister Ariel Sharon, told the Associated Press agency.

Israel has blamed the Palestinian Authority for the attack (AP)

But a leading member of the Palestinian Authority, Saeb Erekat, condemned the attack.

He told the BBC that the authority was not responsible for the attack.

US President George W Bush has condemned the attacks as "despicable".

"These terrorist acts are also attacks on our efforts to restore hope to the Palestinian people," he said.

The explosions come only one day after Palestinian gunmen attacked a West Bank Jewish settlement, leaving eight Israelis dead.

Factory bombed

That was the deadliest attack against Israel since troops pushed into Palestinian-ruled territories across the West Bank after two suicide bombings in Jerusalem killed 26 Israelis in June.

Relatives mourn victims of the settlement massacre

Earlier on Wednesday an Israeli jet bombed a factory at a Palestinian refugee camp in the Gaza Strip.

The Israelis said the factory at the Mughazi refugee camp in central Gaza, was used to manufacture weapons for the militant Islamic group Hamas.

Reports say no-one was hurt in the attack.

Palestinian sources said Israeli troops also opened fire on a house near the West Bank town of Jenin on Wednesday, killing one Palestinian and wounding another.

Israeli presence remains

And in a separate incident, two Palestinians were killed in an explosion in the al-Amari refugee camp in the West Bank town of Ramallah, local officials said.

It is not clear what caused the explosion.

Israel enforces the curfew in the West Bank town of Ramallah

For now Israeli forces are still in control of seven out of eight main West Bank towns with no immediate plans to withdraw.

The Tel Aviv attack comes only a few hours after President Bush had expressed optimism about the Middle East peace process.

Mr Bush and Ariel Sharon have both insisted that Yasser Arafat step down as head of the Palestinian Authority and part of wide-ranging reforms to the organisation.