Israeli forces on Thursday locked down a West Bank town that was home to Palestinians who killed a policewoman and wounded another in Jerusalem, an attack analysts called an escalation after months of violence.

The three Palestinians from Qabatiya near Jenin, believed to be 19 to 20 years old, were shot dead during Wednesday's attack outside Jerusalem's Old City in which the border policewoman was shot in the head.

The attack outside the walled Old City's Damascus Gate, in Israeli-annexed east Jerusalem, was part of a four-month wave of violence, but was among the most severe in the city, where many assaults have involved knives.

Israeli authorities said the three assailants were armed with guns, knives and explosives, indicating they intended to carry out a major attack.

The attack occurred when border police approached the Palestinians for identity checks, Israeli authorities said. As one showed his ID, the others opened fire and began stabbing.

The surviving officer was stabbed and is in a "moderate and stable" condition, according to the hospital treating her. Other police officers fired on the Palestinians and killed them.

The policewoman killed was 19 and had joined the force only two months ago, Israeli media reported. She had not yet completed basic training before being posted to the area, the reports said.

Residents and Palestinian police said all entrances to Qabatiya were locked down as Israeli forces carried out a major operation overnight and into Thursday.

The homes of the three attackers were searched and around a dozen acquaintances or relatives were arrested, they said.

Clashes also broke out between stone-throwing residents and soldiers. A 15-year-old was transported to hospital after being hit by an Israeli jeep and four people were wounded by Israeli gunfire, according to Palestinian medics.

The town of some 15,000 people in the north of the occupied West Bank has seen around 10 residents killed in the wave of violence that began in October.

Mass attack intended?  

Following Wednesday's attack, Israeli Prime Minister Benjamin Netanyahu met with top security officials, who decided to bolster forces in the northern West Bank, an official told AFP on condition of anonymity.

The attack was being seen by Israelis as an escalation after more than four months of Palestinian knife, gun and car-ramming assaults.

"There's no doubt that the intention of a terrorist cell with such an arsenal of weapons was to carry out a mass attack," Israel police commissioner Roni Alsheich said on Wednesday.

The wave of violence since October has killed 26 Israelis, as well as an American and an Eritrean, according to an AFP count.

At the same time, 164 Palestinians have been killed by Israeli forces, most while carrying out attacks but others during clashes and demonstrations.

Some analysts say Palestinian frustration with Israeli occupation, the complete lack of progress in peace efforts and their own fractured leadership have fed the unrest.

Israel blames incitement by Palestinian leaders and media as a main cause.

Many of the attackers have been young people, including teenagers, who appear to have been acting alone. Some analysts said Wednesday's incident indicated a greater level of planning than most of the recent attacks.

The violence meanwhile continued on Thursday, when two 13-year-old Arab Israeli girls stabbed and lightly wounded a security guard at a bus station in Ramle, in central Israel. The two were arrested.

A closely watched court case was also set for later Thursday.

Two young Jews were to be sentenced by a Jerusalem court for the 2014 burning alive of 16-year-old Palestinian Mohammed Abu Khdeir.

The two were minors at the time of the chilling attack in which they and a third man snatched Abu Khdeir from an east Jerusalem street and subsequently killed him.

The killing was part of a cycle of violence that led up to the 2014 Gaza war.

Israeli settler Yosef Haim Ben-David, 31, is said to have led the attack on Abu Khdeir but his lawyers say he suffers from a mental illness and was not responsible for his actions at the time.

The court has found that he committed the crime but is yet to rule if he is mentally competent.