AFP/ Jerusalem

Two Palestinians stabbed three Israelis near Jerusalem's Old City on Wednesday and were shot dead by security forces, police said.

The victims were taken to hospital in serious condition, Israel's Magen David Adom emergency medical service said.

The incident occurred at the Old City's Jaffa Gate, a popular entrance for tourists at a time of increased visits to the Holy Land for the Christmas season.

A wave of violence since the start of October has claimed the lives of 124 on the Palestinian side, 17 Israelis, an American and an Eritrean.

Many of the Palestinians killed have been attackers, while others have been shot dead by Israeli security forces during clashes.

The Shin Bet internal security agency said Wednesday that it had arrested a group of 25 Palestinians in recent weeks for planning bombing and suicide attacks against Israelis.

The agency said most of the suspects were students at Abu Dis university in the West Bank who were recruited by Hamas operatives in the Gaza Strip to ‘form a military infrastructure to carry out bombing attacks’.

The Shin Bet said it had also found an apartment in Abu Dis rented by the group's leader and equipped with materials that could be used to make bombs.

One of the suspects was an east Jerusalem resident, and another was a Bedouin from southern Israel who as a citizen could travel freely in the Jewish state, it said.

A number of the suspects had agreed to carry out suicide bombings in return for money from Hamas in Gaza, the Shin Bet said.

It said the organisation was proof of Hamas's increased efforts to use the recent rise in violence in the West Bank to try execute bombing and suicide attacks there and in Israel.