Israeli Border Police patrolling central Jerusalem on Thursday a day after a young Palestinian man drove his car into a crowd of people at a Light Rail station, killing a baby.

AFP/Jerusalem

Israel on Thursday pledged a tough response to any further attacks in Jerusalem as police flooded flashpoint Arab neighbourhoods a day after a Palestinian car attack killed a baby.

It was the second deadly incident involving a Palestinian driving a vehicle in three months and prompted a sharp warning from Prime Minister Benjamin Netanyahu.

"Jerusalem is united and was, and always will be, the eternal capital of Israel. Any attempt to harm its residents will be met with the harshest response," he said.

Wednesday's attack saw a Palestinian ramming his car at high speed into a crowd of Israeli pedestrians, killing a baby and injuring another six people in what police dubbed "a hit-and-run terror attack".

The driver, 21-year-old Abdelrahman Shaludi from Silwan in east Jerusalem, was shot while trying to flee the car on foot and later died of his injuries.

Israel said Shaludi was a Hamas activist, but although family members confirmed he was the nephew of a top-Hamas bombmaker who was killed 1998, it was not clear whether he himself belonged to the Islamist movement.

The incident triggered clashes between police and stone-throwing Palestinians across east Jerusalem which lasted into the early hours. Police confirmed arrests but would not give a number.

By Thursday morning, following an order from Netanyahu, police surged into flashpoint neighbourhoods in a bid to stamp out a wave of persistent unrest that began nearly four months ago.

Netanyahu also lashed out at Palestinian President Mahmud Abbas, accusing him of encouraging attacks in the city.

"Jerusalem is coming under attack by terror... and this attack is supported by the chairman of the Palestinian Authority," he said in his second attack on Abbas since the fatal incident.

On Wednesday evening he accused the Palestinian leader of "inciting a terrorist attack in Jerusalem."

But chief Palestinian negotiator Saeb Erakat accused Netanyahu of turning a blind eye to Israel's provocative actions in the city's strife-hit east.

"The man, once he looks at the mirror... should know who's responsible for the miserable situation of Palestinians and Israelis, the escalation of violence and so on," he told reporters in Ramallah.

"He plants the seeds of desperation."

Family members said Shaludi had been recently released from prison where he served 14 months for disturbing the peace, a euphemism for participating in unrest.

Palestinian community officials say the wave of unrest gripping the city is fuelled by a sense of hopelessness resulting from Israel's policies in east Jerusalem, which have left many young people with a sense that they have nothing to lose.

Police warned on Thursday they had adopted a "zero tolerance" policy toward any incident of violence in the city, pledging to prosecute offenders to the fullest extent.

Police officials said they had activated "a strategic plan" to end the wave of unrest, which would include aerial observation and the deployment of extra forces on the ground, some of them undercover.

The victim, three-month-old Haya Zissel Braun, was buried at a late-night funeral in Jerusalem.

During another incident in August, a Palestinian rammed a bus with an excavator, killing one Israeli and injuring five. Police shot the driver dead.