Suspected Jewish militants shot and killed three Palestinians, including a baby boy, prompting an urgent appeal from the Palestinian Authority for foreign observers in the West Bank and Gaza.
Israel Radio said a group calling itself "The Committee for Safety on the Roads" - a name referring to the danger Jewish settlers face from Palestinian gunmen - claimed responsibility for the shooting near the West Bank city of Hebron.
The attack killed three-month-old Diya' Tmeizi - the youngest person to die in 10 months of Israeli-Palestinian fighting.
"The Palestinian leadership holds the Israeli government fully responsible for this crime against our people," the Palestinian Authority said in a statement.
"We appeal to the industrialised nations' summit to take an immediate, urgent and decisive decision to send international monitors to the Palestinian territories to protect our people from the oppression of the occupation army and the brutal crimes conducted by the settler militias."
In a break with standing policy, Israeli Defence Minister Mr Binyamin Ben-Eliezer said today Israel might allow monitors to oversee a future truce - if they came from the United States, Israel's long-time closest ally.
"The whole matter of observers is unacceptable to us, but if this will be forced upon us, I will live with the presence of monitors of the Americans," he told Israel Radio.
Palestinians have long appealed for international protection against what they say is Israel's disproportionate response to their uprising for independence they began nearly 10 months ago.
Group of Eight foreign ministers in Rome yesterday, hours before the attack on the Palestinian family's car, had called on Israel and the Palestinians to let outside monitors oversee an endangered US-backed truce-to-talks plan.