An anonymous Palestinian who telephoned Israel radio claimed the militant Islamic organisation Hamas was responsible. Palestinian security forces last night placed Sheikh Ahmed Yassin, the founder and spiritual leader of Hamas, under house arrest in Gaza.
With last week's agreement on a limited Israeli withdrawal from the West Bank in the balance, the Palestinian police immediately cracked down on Hamas.
The Palestinian president, Yasser Arafat, condemned the suicide bombing. "This operation is directed against the interests of the Palestinian people, particularly at a time when there seems to be a breakthrough economically and politically," he said.
His security forces seemed determined to convince the Israelis - and Washington - that they were fulfilling their commitment to combat anti- Israeli violence in return for the evacuation of another 13 per cent of the West Bank.
Dozens of activists were arrested yesterday - including Dr Mahmoud Zahar, Hamas's political leader and the chief spokesman in the Gaza Strip.
A top security officer confirmed that Sheikh Yassin was under house arrest, though a member of his family told reporters that they knew nothing about it.
The wheelchair-bound Muslim preacher returned to Gaza a year ago after serving eight years in an Israeli prison.
In interviews with Arab reporters earlier this week, the charismatic sheikh denounced the Israel-Palestinian accord. "Any agreement that does not remove the occupation from all Palestinian lands, bringing freedom and independence to our people, is worthless," he said.
The agreement was brokered by President Bill Clinton at Wye, in the United States, last week.
Yesterday's attack took place at 7.30am at Gush Katif Junction in the south of the Gaza when a bus, escorted by two army jeeps, was taking 40 children to school. The children, aged between six and 14, were from Kfar Darom, an isolated Jewish settlement, where 5,000 heavily protected Israelis live surrounded by a million Palestinians.
An Opel car, which was waiting close to a Palestinian flour mill, tried to ram the bus. One of the jeeps intercepted it and the driver of the car blew himself up. The remains of the bomber's car were said to be barely recognisable.
None of the children on the bus was injured.
David Bar-Illan, a senior adviser to Benjamin Netanyahu, the Israeli Prime Minister, said the attack would not delay the implementation of the Wye Agreement, which is due to start next Monday.
But he said the government did blame Mr Arafat's Palestinian Authority for "lionising and glorifying terrorists on the one hand, while giving lip-service to fighting terrorism".
Mr Netanyahu is now very much in the position of Yitzhak Rabin, his predecessor, who was assassinated by a Jewish right-wing extremist in 1995.
At that time, support for the peace accords among Israelis was eroded by a series of suicide-bomb attacks on civilians.
Uri Dromi, the Israeli government spokesman under Mr Rabin and now at the Institute for Democracy in Jerusalem, said: "This is the big test for Netanyahu. We will see if he really wants to implement the agreement."Reuse content