Palestinian gunmen opened fire on the street outside an Israeli military base in the city of Beersheba, killing two people wounding at least six others before two of the assailants were shot dead.
Israel Radio reports the gunmen got out of a car before shooting near the gates of the army's southern command headquarters in the center of the city.
Many soldiers on their lunch break were on the streets and they began firing back at the attackers. Two were shot dead, but there are reports that a third managed to escape.
Of the six people shot by the attackers, two are were described as being in a critical condition, later died.
"Soldiers, men and women, were hit. Both terrorists were killed," said the city's Mayor Mr Yaacov Terner.
He said authorities are investigating to determine if a third attacker was involved. Israel TV says the area had been closed off and a search is on for a third attacker believed to be dressed as an Israeli soldier.
The TV also reports one of the dead assailants was believed to have explosives strapped to his body and was killed before he had a chance to detonate them.
The TV said the army is trying to defuse the bomb.
PA & AFP