Israel to deny return of all Palestinian attackers' bodies

Israel further clamped down on Palestinian movements and on Thursday said it would step up troop deployment after Palestinian gunmen shot dead four people at a popular Tel Aviv nightspot, the deadliest attack in a months-long wave of violence.

Authorities also imposed a string of punitive measures, vowing to not return the bodies of attackers for burial and also revoking tens of thousands of entry permits for Palestinians during the holy month of Ramadan.

Israeli authorities also said they would send two additional battalions - hundreds more troops - into the occupied West Bank.

Newly installed Defence Minister Avigdor Lieberman orders that the bodies of Palestinians killed while carrying out attacks no longer be returned to their families for burial, are backed by Israeli hawks as a deterrent measure.

The move was the hardliner's first major decision related to the Israeli-Palestinian conflict since he took office on 30 May.

Two Palestinian cousins - identified as Khaled Mohammad Makhamera, 22, and his cousin Mohammad Ahmad Makhamera, 21 – are believed to be behind Wednesday night's attack.

Their home town of Yatta near Hebron has now been "been completely cordoned off" the government said after the security cabinet meeting, adding that soldiers were patrolling and stopping cars as they entered and exited.

The pair walked into a busy district where people were out walking and eating and opened fire on a cafe, killing four people and injuring many others. The victims were identified as Ido Ben Aryeh, 42, Ilana Nave, 39, Michael Feige, 58, and Mila Mishayev, 32, all Israelis.

One of the attackers was arrested, while the other was under guard in hospital after being wounded by gunfire.

Prime Minister Benjamin Netanyahu visited the scene of the shooting and gave a speech calling the incident a "cold-blooded terrorist murder".

"There will be intensive action by the police, the army and other security services, not just to catch every accomplice to this murder but also to prevent further incidents," he said.

Lieberman also visited the scene of the attack and ordered lunch at the café, which stayed open to accommodate mourners who flooded in throughout the day. 

After lunch, Lieberman chaired a security meeting during which he reportedly pushed for even faster punitive demolitions of Palestinian attackers' homes.

Netanyahu had already fast-tracked such demolitions after the current wave of violence broke out in October.

It was not yet clear if the attackers were acting alone or as part of a larger plot.

A spokesman for Hamas, that runs the Gaza Strip and is also present in the West Bank, called the attack a "heroic operation" but has not claimed the incident.