A Palestinian suicide bomber killed three people in a bakery in the Red Sea resort of Eilat, one of Israel's most popular holiday spots, in the first such attack in the Jewish state in nine months, police said.
Islamic Jihad, al-Aqsa Martyrs Brigades and the previously unknown "Army of Believers" claimed joint responsibility for the bombing.
The attack -- the first time Eilat has been hit by a suicide bombing -- came four days before the so-called Quartet of Middle East peace negotiators was to meet in Washington as part of a renewed effort to revive Israeli-Palestinian peacemaking.
Khaled al-Batsh, a senior Islamic Jihad leader, said the bombing was "a natural response to the continued crimes by the Zionist enemy".
The blast tore through the "Lechamim" bakery in a residential neighborhood far from a strip of beach hotels. Loaves of bread, still on trays, lay on the blood-stained pavement outside.
"I saw a man with a black coat and a bag. For Eilat, where it is hot, it is strange to see someone walking with a coat. I said to myself, 'Why is this idiot dressed that way?'
Seconds later, I heard a huge blast. The building shook," Benny Mazgini, a local resident, told Israel Radio.
The identities of the victims were not released.
The bombing raised fears in Israel that tourism to Eilat could be hit.
Nearly 180,000 foreign tourists visited the resort, at the northern tip of the Red Sea, last year. The city has been spared the violence of a more than six-year-long Palestinian uprising.
Asked what she would tell foreigners planning an Eilat vacation, Miri Eisin, a spokeswoman for Prime Minister Ehud Olmert, said: "In 2006, we prevented many suicide attacks, and we will continue to do so. It's safe to come to Israel, as it was in the past."
Mickey Rosenfeld, a spokesman for the national police, said three people and the bomber were killed in the bakery. Police initially said the explosion was caused by a gas leak.
A spokesman for al-Aqsa Martyrs Brigades, part of Palestinian President Mahmoud Abbas's Fatah faction, identified the suicide bomber as Mohammad Faisal Siksik, 21, from Gaza City.
Israeli military affairs commentators said the bomber may have crossed from Gaza into Egypt and then made his way across the Sinai peninsula to the porous Egyptian-Israeli frontier near Eilat.
Eilat, some 350 kilometres south of Jerusalem, is also bordered by Jordan.
A Palestinian suicide bomber last struck in Israel on April 17, 2006, killing 11 people outside a restaurant in Tel Aviv in an attack claimed by the Islamic Jihad group.
The governing Hamas movement is party to a truce that militants in Gaza struck with Israel in November.