The Israeli prime minister, Binyamin Netanyahu, who is on a three-day European tour, rang the US Secretary of State, Warren Christopher, in what was seen as an attempt to preempt American criticism.
Seven Israeli soldiers were wounded. Three of the dead were members of the Palestinian security forces. "We have seven martyrs in Ramallah,'' a senior PLO spokesman said.
The fighting and earlier confrontations began when Israeli troops fired on demonstrators marching on their checkpoint south of the town, which is under Palestinian self-rule. Shawki Hareb, director of Ramallah Hospital, reported last night that several of the wounded were in a serious condition.
Palestinian sources said the Israelis advanced into the Palestinian-controlled zone. An Israeli army spokesman denied it, saying Palestinian police refused a request to help restore order; the Israeli troops came under fire and shot back in self-defence.
The Palestinians were protesting at the opening of an archaeological tunnel this week which they claimed infringed their rights in the Muslim quarter of Jerusalem's Old City. Smaller protests also took place in Jerusalem, Hebron and Gaza, but no serious casualties were reported.
Hanan Ashrawi, a member of Yasser Arafat's Palestinian cabinet, who lives in Ramallah, saw the first clashes and later visited the hospital in search of her 15-year-old daughter, Zeina.
"The Israeli army was going berserk," she told the Independent. "They were shooting with rubber bullets, plastic bullets, live ammunition. Then they moved forward into the Palestinian-controlled area, shooting at adults and kids. In Ramallah Hospital I saw one civilian ... with a bullet through the heart and lungs.
"It was like a massacre. People were being operated on in the corridors. The wounded were lying on stretchers all over the place. The doctors were appealing for extra medical staff and blood donors. They just couldn't cope.
"Mothers were desperately asking for their kids. I was looking for my own daughter. Fortunately, she was safe."
The shooting stopped before dusk, but Dr Ashrawi, a former spokeswoman for the Palestinian peace negotiators, defined the situation as a turning- point. "Things are drastic, very volatile, very dangerous."
The Israelis insisted they used live ammunition only after they had come under fire. In a statement last night he said: "They were dispersing a violent Palestinian demonstration. Hundreds of Palestinians approached an Israeli army checkpoint south of Ramallah. The army repelled them into the city by shooting in the air, firing rubber bullets and using tear gas.
"Our forces were careful not to enter the Palestinian- controlled area. The army turned to the Palestinian police requesting aid in calming the situation, but the Palestinians did not act. During the incident light-weapons fire was aimed at our soldiers, who returned fire at its source," the spokesman said.
The Arab League is meeting in emergency session in Cairo today to discuss the crisis and yesterday the Palestinians postponed the resumption of peace negotiations scheduled for today. These would have been the first substantive talks since Mr Netanyahu's right-wing government came to power in Israel three months ago.
The chief Palestinian negotiator, Saeb Erakat, said: "Negotiations are not an objective in themselves. Every time we meet, we hear new announcements of expansion of Jewish settlements or the Judaisation of Jerusalem. This government has failed to honour even one point of the peace agreement. Netanyahu is taking us back to the era of violence and counter-violence."
But Dr Erakat was careful not to write off the negotiations permanently. The first item on the agenda is the Israeli redeployment in Hebron, the last West Bank city still under occupation.
Netanyahu juggles, page 11Reuse content