Two people were killed and more than a dozen others wounded in a shooting at a bar in a busy area of Tel Aviv late on Thursday, Israeli officials said.

The suspected gunman was killed by security forces following a manhunt, according to a statement from Israel's General Security Service on Friday morning.

"At the end of a chase by the security forces, the terrorist who carried out the attack in Tel Aviv was located and thwarted," the statement read.

The General Security Service said the suspect was shot and killed by the Shabak security forces following an exchange of fire.

The suspect was "located by the Shabak (General security service) while hiding near a mosque in Jaffa and during an exchange of fire with the Shabak and YAMAM (Israel's counter terror National unit) fighters, he was killed on the spot," the statement said.

It identified the gunman as Raed Hazem, a 28-year-old from the Palestinian city of Jenin in the West Bank, who had "no clear organizational affiliation, no security background and no previous arrests." The service said Hazem did not have a permit to enter Israel and was an illegal resident.

The investigation into the attack continues, according to the General Security Service.

The incident happened at a bar on Dizengoff Street, a popular dining area in the center of the city, an Israeli police commander said.

The number of wounded was not immediately clear. Speaking on Israeli TV, Tel Aviv police commander Ami Eshed put the number at more than a dozen.

Journalist Lauren Izso, on the scene shortly after the attack, estimated hundreds of police were involved in securing the area and searching for the gunman.

Speaking on Israeli TV, Tel Aviv mayor Ron Huldai told residents in the city to stay home.

The two people killed were men who were both around 30 years old, a spokesperson for the Magen David Adom emergency services said.

Tel Aviv's Ichilov hospital, where most of the casualties were taken, said doctors were fighting to save the lives of four people who were wounded.

The shooting is the latest in a series of violent incidents that have put Israel and the Palestinian territories on edge.

In just one week in March, 11 people were killed in three attacks in Israeli towns and cities. It was the deadliest week Israel had seen in years and follows weeks of rising tensions that saw Israelis targeted in stabbing attacks and several Palestinians shot dead by Israeli forces in the West Bank.

That spate of attacks included five people killed just east of Tel Aviv, in the ultra-orthodox city of Bnei Brak.

It's not clear whether Thursday's shooting is connected to the recent violence.

Militant groups in Gaza and the West Bank praised Thursday's attack, though they stopped short of claiming responsibility.

Hamas called it a heroic operation, while Islamic Jihad vowed "resistance will continue."

Condemning the attack, the United Nations Special Coordinator for the Middle East Tor Wennesland, singled out Hamas in a tweet, saying, "Deplore the welcoming of this attack by Hamas; there is no glory in terror. These attacks must stop now and be condemned by all." (CNN)

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