Israeli security forces secure the site of a tractor attack on Jerusalem's King David Street on Tuesday. The tractor driver was killed after he attacked two cars with the vehicle, police said. (Marco Longari/AFP/Getty Images)

A man rammed a construction vehicle into three cars and a city bus on a busy downtown Jerusalem street on Tuesday, before he was shot dead in the second such incident in the area this month.

Four people were injured before a civilian shot and killed the driver, and police are searching for two suspects who fled, police said.

The attack happened several hundred metres from the luxury King David Hotel, where U.S. presidential hopeful Barack Obama is scheduled to stay Tuesday night during a trip to Israel.

Speaking in neighbouring Jordan, Obama said the rampage was a "reminder of what Israelis have courageously lived with on a daily basis for far too long." Police said there is no evidence the incident is related to Obama's visit.

Palestinian President Mahmoud Abbas, who was meeting his Israeli counterpart Shimon Peres at the time, has condemned the attack. Such incidents, Abbas said, 'hurt our reputation and peace in general."

Earlier in July, on another busy Jerusalem street five kilometres away, a Palestinian from east Jerusalem plowed a front-end loader into a string of vehicles and pedestrians, killing three and injuring dozens before an off-duty officer shot the assailant dead.

Attacker had Israeli travel permit: police

Officials identified the latest attacker as 22-year-old Ghassan Abu Teir, a Palestinian from a West Bank village near east Jerusalem who holds an Israeli residence permit. Such permits allow the holder to move and work freely within Israel.

"This was another attempt to murder innocent people in a senseless act of terrorism," said Mark Regev, a spokesman for Israeli Prime Minister Ehud Olmert.

There was no immediate claim of responsibility. The attack was praised by the Islamist group Hamas in the Gaza Strip as "a natural reaction to the crimes of the [Israeli] occupation." Teir is said to be related to a senior Hamas official.

A lawyer for the family of the construction worker who perpetrated the July 2 attack later told media that the man "went berserk" and acted completely alone.

'Just kept ramming into cars'

Israeli rescue services said one person evacuated had a partially severed leg. Local media also reported that a mother and her baby were among the injured.

Witness Moshe Shimshi said the driver slammed into the side of the bus, then sped away and went for a car. "He didn't yell anything, he just kept ramming into cars," Shimshi said.

The driver then headed for cars waiting at a red light "and rammed into them with all his might," he added.

Officers sealed off all possible escape routes into east Jerusalem on Tuesday and were searching for the two suspects, police spokesman Micky Rosenfeld said.

About one-third of Jerusalem's 700,000 residents are Arab, most of them living in east Jerusalem. Israel seized control of east Jerusalem from Jordan in the 1967 war. Palestinians want the eastern sector as the capital of a future Palestinian state.

In 1980, Israel declared all of Jerusalem as its "eternal and indivisible capital," but the declaration has not been internationally recognized.

Arab residents of east Jerusalem, many of whom are not Israeli citizens, have full freedom to work and travel throughout the Jewish state. They have the same blue identity cards issued to all Israeli citizens.

The July 2 attack plus a deadly shooting at a Jerusalem religious school in March renewed debate over the status of Arab residents in east Jerusalem since both attackers were Palestinians living and moving freely within the city's confines.

With files from the Associated Press