Israeli troops and armoured vehicles have re-entered Bethlehem in response to a suicide bombing which is believed to have been carried out by a man from the West Bank town.

Soldiers have been conducting house-to-house searches for 30 suspected militants. At least nine people have been held, Israeli and Palestinian sources said.

The suspected suicide bomber in Thursday's attack, which killed 11 in Jerusalem on Thursday, was 23-year-old Nael Abu Hilail who came from Bethlehem, Israeli police said.

The attack took place in rush hour

Palestinian and Israeli leaders traded accusations in the wake of the raid, which began before dawn on Friday.

"Israel wants to destroy peace not only with the Palestinians but with the whole of the Middle East and with all Arab countries", Palestinian leader Yasser Arafat told the French news agency AFP.

"Anyone who harms Israel, a little or a lot, will have his hand chopped off", Israeli Prime Minister Ariel Sharon said, the Associated Press reported.

Blockade

Troops surrounded the Dheisheh refugee camp and blocked off Bethlehem's Manger Square and the Church of the Nativity to prevent Palestinian gunmen seeking refuge there.

Israeli military spokesperson Sharon Feingold told the BBC that Palestinian militants had set up a "terror infrastructure" in Bethlehem since Israeli troops pulled out in August as part of a confidence-building security deal.

Israel announced that the deal was off after Thursday's bombing, the deadliest since June.

Captain Feingold said the Palestinians had "miserably failed" to fight terrorism, a condition of the August agreement.

Friday's incursion leaves Israel in control of seven of the eight major West Bank towns.

Residents evicted

The streets of Bethlehem are eerily quiet, with just a few children playing in the road and the occasional Israeli jeep making its rounds to make sure the curfew is observed, the BBC's Simon Wilson in Bethlehem says.

At the Church of the Nativity - the scene of a long siege earlier this year - armoured personnel carriers and at least one tank have blocked all the main entrances, to make sure no Palestinian gunmen can take refuge inside, our correspondent says.

Earlier, Israeli troops entered the village of al Khader on the outskirts of Bethlehem, ordering Palestinian residents out of at least 25 homes.

Palestinian security personnel are reported to have evacuated their bases in Bethlehem.

Observers say Prime Minister Ariel Sharon is under intense pressure to take a hard line against Palestinian extremists as he seeks re-election in a January poll.

Israeli troops returned after three months

The military wing of the Islamic movement Hamas claimed responsibility for the Jerusalem bombing, which also injured more than 50 during the morning rush hour.

In a statement, the group said the bombing was in response to the Israeli occupation of the Palestinian territories and the killing of Palestinians, pledging that more such deadly attacks would follow.

The suspected bomber's father, Azmi, told the Associated Press he supported his son's action: "Our religion says we are proud of him until the day of resurrection. This is a challenge to the Zionist enemies."

Hamas, whose immediate aim is to secure an Israeli withdrawal from the West Bank and the Gaza Strip, has claimed responsibility for the majority of attacks against Israeli targets since the Palestinian uprising against occupation began two years ago.