A bomb blew up a bus and set fire to another in Jerusalem on Monday, wounding 16 people in an attack that Israeli Prime Minister Benjamin Netanyahu linked to a six-month-old wave of Palestinian street violence.
There was no immediate claim of responsibility from any Palestinian factions for the blast. Israeli officials declined to assign direct blame.
They said two of the casualties had not yet been identified and may have been bombers.
Suicide bombings on Israeli buses were a hallmark of the Palestinian revolt of 2000-2005 but have been rare since. With Palestinians carrying out less organized stabbing, car-ramming and gun attacks since October, Israel has been braced for an escalation.
"We will settle accounts with these terrorists," Netanyahu said in a speech, referring to whoever executed the bus attack.
"We are in a protracted struggle against terror - knife terror, shooting terror, bomb terror and also tunnel terror," he added, speaking hours after Israel announced its discovery of an underground passage dug by Hamas militants from Gaza.
Police initially said they were looking at the possibility that a technical malfunction caused the fire that consumed two buses on Derech Hebron road, in an area of southwest Jerusalem close to the boundary with the Israeli-occupied West Bank.
But based on the wounds and other findings, authorities concluded that a small and possibly rudimentary explosive device was set off at the back of one of the buses.
Those details recalled the bombing of a Tel Aviv bus by an Israeli Arab during the 2012 Gaza war which caused injuries but no deaths.
In the last half year, Palestinian attacks have killed 28 Israelis and two visiting U.S. citizens. Israeli forces have killed at least 191 Palestinians, 130 of whom Israel says were assailants. Many others were shot dead in clashes and protests.
Drivers behind the bloodshed include Palestinian bitterness over stalled statehood negotiations and the growth of Israeli settlements in the West Bank, stepped up Jewish access to a disputed Jerusalem shrine, and Islamist-led calls for Israel's destruction.
Bombings have not been carried out during this period - though Israeli prosecutors said a Palestinian woman who tried to blow up a gas balloon in her car after being pulled over by police in October was a would-be suicide bomber.