An attacker shot and wounded two Israeli policemen guarding one of the ancient gates of Jerusalem overnight, just metres from the mosque compound that lies at the heart of rival Jewish and Muslim claims to the city.

Police were treating the incident, which left one officer in a serious condition with a gunshot wound to the head, as a "terror" attack although on Saturday they were still hunting the assailant, who fired from a Muslim cemetery under the city wall.

The attack came just over a week after a Palestinian killed three Israeli motorists during a bulldozer rampage on one of Jewish West Jerusalem's busiest streets, adding to tensions with residents of occupied Arab East Jerusalem who have free access to Israel, unlike Palestinians in the West Bank and Gaza Strip.

"As far as we are concerned it was a terror attack," police spokesman Micky Rosenfeld said. "Shots were fired from the adjacent Muslim cemetery at two police officers on patrol and the attacker ran away." Police were scouring nearby Arab areas, he said.

The shooting took place shortly before midnight (10 p.m. British time) at the Lions' Gate, also known as St. Stephen's Gate, in the eastern wall of the kilometre (1,000-yard) -square Old City.

Armed police normally guard the gates through which thousands of Muslims, Jews and Christians make their way each day to pray at the profusion of holy sites in the Old City.

Earlier on Friday it would have been busy with Muslims going to weekly prayers at the al-Aqsa Mosque, the surrounding garden wall of which lies about 60 metres (yards) from Lions' Gate.

Jews, who revere the same spot as the site of their ancient Temple, would also have been present in large numbers in the evening, making Sabbath visits to pray at the Western Wall.

For Christians, St. Stephen's Gate, leads to the Via Dolorosa, the way they believe Jesus walked to his crucifixion.

While much remains unexplained about the shooting and the bulldozer attack, the incidents, along with the killing of eight Jewish seminary students in March, have prompted calls among Israelis for tighter security measures on the quarter-million Palestinians who have rights of residence in Jerusalem.

Israel annexed Arab East Jerusalem and areas of the West Bank after occupying them in the 1967 Middle East war. It now considers all of that area, including Jewish West Jerusalem, its capital, a claim that is not recognised internationally.

Palestinian President Mahmoud Abbas has said he wants a capital of a future Palestinian state to be in Jerusalem.