Hamas and IS both say they killed Israeli policewoman

At one location, two Palestinians were shot dead after opening fire at a group of Israeli police officers.

Palestinians say it stems from anger over decades of Israeli rule in territories they claim for their future state.

Hamas, the Palestinian group that administers the Gaza Strip, dismissed ISIL's claim, saying the three attackers had come from among its own ranks, as well as the leftist Popular Front for the Liberation of Palestine (PFLP). It was the first time that the organization took responsibility for a terror attack inside Israel, a target which the group warned it will "wipe out".

The jihadist group, in an online statement, said three IS fighters had targeted "a gathering of Jews" in an operation on Friday during which the three attackers were killed by Israeli police.

One female police officer was critically injured, and later died, while four bystanders were wounded in the attacks, said the police. "At this stage no indication has been found it was directed by terrorist organisations nor has any connection to any organisation been found", Simri said.

Large numbers of heavily armed security forces were patrolling throughout the Old City, an AFP reporter said.

Since October 2015, more than 285 Palestinians have been killed by Israeli police during - or immediately after - alleged attacks on Israelis or in clashes with Israeli security forces, according to Palestinian figures.

On the other hand, Israeli authorities responded to the attack by revoking the visas of over half a million Palestinians which were previously granted in the observance of the Muslim Holy month of Ramadan and the upcoming holidays.

Major General Yoav Mordechai - head of COGAT, the Israeli defence ministry agency responsible for civilian affairs in the Palestinian territories - said the family visit permits were cancelled in response to "encouragement to terrorism" by Palestinian president Mahmoud Abbas's Fatah movement.

Following the attack, the Israeli army raided Deir Abu Mashal, the village near Ramallah the three perpetrators hailed from, sealing off its entrances and mapping out the homes of the three for demolition.

Israel police identified the other two as Palestinians aged 18-19 from the Ramallah area.

Instead, an obscure Palestinian group known as the "Groups of Martyr Baha Eleyan" claimed responsibility. Like the youngest generations in many countries today, the Oslo generation are looking forward to replacing their current incompetent leadership with new, young, energetic leadership that will take them to war against Israel, and lead to atrocities, mass killing, rape and torture of both Palestinians and Israelis, and a region soaked with blood. In that time, some 250 Palestinians were killed by Israeli fire.

"The attack in Jerusalem is new proof that the Palestinian people continue their revolution against the occupiers and that the intifada will continue until complete freedom is achieved", the statement read.