Seven people were shot dead and at least three others were wounded in a synagogue in East Jerusalem.
The incident occurred in the Neve Yaakov neighborhood of the city at around 20:15 local time (18:15 GMT).
Police described the attacker as a “terrorist” and said he had been “neutralised”.
The attacker was identified as a Palestinian man from the Shuafat refugee camp in East Jerusalem.
From the scene, Israeli Police Commissioner Kobi Shabtai described the incident as “one of the worst attacks we have faced in recent years.”
The United States condemned the attack. “We stand with the Israeli people in solidarity,” said foreign ministry spokesman Vedant Patel.
Several other countries have also expressed concern, including Australia and the United Kingdom.
“The attack on worshipers in a synagogue on Holocaust Remembrance Day and during Shabbat is appalling. We stand with our Israeli friends,” British Foreign Secretary James Cleverly wrote on Twitter.
Local media reported that the attacker was shot dead by security forces while he was fleeing. Police and forensic teams are conducting investigations regarding a white car that appears to have been driven by the gunman.
Shortly following the incident, Israel’s controversial far-right national security minister, Itamar Ben Gvir, visited the site of the shooting.
Ben Gvir has pledged to restore safety to the streets of Israel, but there is growing anger that he has not yet done so, says the BBC’s Yolande Neal in Jerusalem.
Tensions have escalated since nine Palestinians were killed during an Israeli military raid in Jenin, in the occupied West Bank, on Thursday.
This was followed by the firing of rockets into Israel from Gaza. Israel responded with air strikes.