Axeman kills Israeli child

The attack posed an important test for Israel's new Prime Minister, Benjamin Netanyahu, who has promised a firm hand against militants and expressed scepticism about the prospects for peace. Government spokesman Mark Regev called yesterday's attack a "senseless act of brutality against innocents".

Police and military units were searching for the attacker, with forces operating in the nearby village of Safa, searching houses and taking village residents to a central schoolyard. The military said all roads around the settlement of Bat Ayin were closed.

A resident of the settlement, identifying himself only as Avinoam, said that he had fought off the attacker.

"I fell down, and then I managed to get up... At some stage I managed to grab the axe from his hand," he told Channel 10 TV. The assailant had "a lust for murder in his eyes," he said.

A murky militant group calling itself the Martyrs of Imad Mughniyeh claimed responsibility for the attack in an email. The group is named after a Hizbollah commander who was killed in Syria last year in what is thought to have been an assassination by Israeli intelligence. It has claimed a number of past attacks, but Israeli defence officials believe it is probably a name used by other groups to avoid Israeli reprisals.

The email said the militant group Islamic Jihad was also involved, but the group's spokesman in Gaza would not comment.

The attacker apparently entered Bat Ayin, south of Jerusalem, unhindered. The settlement is home to religious settlers who have refused to build a security fence around their community, as is the rule in most other settlements, saying fences are a sign of insecurity. The attack is likely to heighten tensions between the Palestinians and Israel's new hard-line government, which has already voiced scepticism about peace negotiations in its first days in office.

"[We] will have a zero tolerance policy toward these sorts of attacks and will refuse to accept them as routine," Mr Regev said. "The Palestinian leadership must, both in word and in deed too, have a zero tolerance policy to this sort of attack to demonstrate its commitment to peace and reconciliation."