Lebanon, said it carried out the

bombing near Megiddo, the Hebrew

A Palestinian car bomb exploded next to a passenger bus packed with civilians and soldiers in northern Israel yesterday, killing at least 16 people and wounding dozens, security officials said.

The attack was a major new setback to international efforts to end 20 months of Israeli-Palestinian violence. It followed two days of talks between US CIA Director George Tenet and Palestinian and Israeli leaders.

The blast coincided with the 35th anniversary of the start of the 1967 Middle East war in which Israel seized the West Bank and Gaza Strip, where Palestinians now want to establish a state.

The militant Palestinian group Islamic Jihad, in a telephone call to al-Manar television station in

name for Armageddon.

The car blew up during the morning rush hour at the Megiddo road junction. The bus was on its way from Tel Aviv to Tiberias by the Sea of Galilee.

A chunk of mangled metal was all that remained of the car-bomb and the bus. The explosion sprayed body parts and debris for hundreds of metres (yards) across a main highway.

Security officials said at least 16 people had been killed in the blast, a few kilometres (miles) from the "green line" border with the West Bank.

"I could not get near the bus, it was too hot. We pulled casualties away from the bus. Personnel came out of the nearby prison. We started

to deal with the injured -- there were many soldiers," said Ogen Drori, a 25-year-old medic and witness.

The bombing followed a resurgence of Palestinian suicide bombings following an Israeli military offensive in the West Bank that Israel said was intended to halt such attacks, which are part of a Palestinian uprising against Israeli occupation.

"This is a very serious terrorist attack. There are many casualties, including fatalities," regional police commander Dov Rutsky told Israel Radio.

"Initial indications at the scene are that the explosion occurred at the bus's flank. It was a car bomb."

Three bodies in olive-drab uniforms lay in front of the wreckage, surrounded by emergency crews and police sappers checking the area for more bombs.

It was not clear how many of the dead were soldiers and how many were civilians.

The blast was only a few kilometres from the West Bank city of Jenin, scene of some of the heaviest

fighting during the recent Israeli military offensive. Israel describes Jenin refugee camp as a major Palestinian militant base.

Israel's security cabinet later convened for a meeting that had been scheduled before the blast.

Israel blames Palestinians

An official in Sharon's office called the bombing "another cowardly act of terror by the Palestinians, showing again that murder and the Palestinian Authority are indistinguishable".

Ahmed Abdel-Rahman, an aide to Palestinian President Yasser Arafat, blamed the attack on the "continued Israeli occupation of Palestinian areas."

Abdel-Rahman said Israeli invasions into Palestinian territories had made it impossible for the Authority to carry out its security duties.

Tenet, the director of the Central Intelligence Agency, has been leading the latest diplomatic drive to halt the violence, in which at least 1,379 Palestinians and 486 Israelis had been killed before Wednesday's attack.