Four people have been killed and at least 16 injured after a suspected terrorist rammed a truck into a crowd of soldiers in Jerusalem.

The driver accelerated into the group exiting a city bus at the popular Armon HaNatziv promenade in south Jerusalem.

The Israeli Prime Minister Benjamin Netanyahu said the attack was probably linked to the Isis terror group.

He said that “all signs point to the attacker being an Islamic State supporter”.

“We know that we have here a series of attacks, and there could be a link between them, from France to Berlin, and now Jerusalem,” he added.

The four dead – three women and one man – were in their 20s. It is one of the deadliest attacks in terms of Israeli loss of life in more than a year of bitter fighting with Palestinians.

Unconfirmed reports suggest some victims were trapped under the bus after the incident while police have confirmed the perpetrator was “neutralised” at the scene.

“It is a terrorist attack, a ramming attack,” a police spokeswoman told local media, which also reported that bodies were “strewn on the street”.

Israeli security forces work at the scene of the incident (Reuters)

Nir Barkat, the mayor of the city issued a statement calling on residents to “not let terror win”.

“To our dismay, there is no limit to the cruelty of the terrorists who are willing to use any means possible to murder Jews and to damage the daily life of Israel’s capital.”

He added: “Those who incite and fan the flames and those who support terror must pay a heavy price. I call on the residents of Jerusalem and the country at large to be alert and, despite this difficult terror attack, to carry on with your daily routines and do not let terror win.”

Palestinian militant group Hamas praised the attacker. A spokesman called the attack a “heroic” act and encouraged other Palestinians to “escalate the resistance”.

Hamas spokesman Abdul-Latif said the attack proves the wave of Palestinian violence has not ended, despite a recent lull. “It may be quiet, it may linger, but it will never end,” he said.

The soldiers were reportedly on a trip to the capital as part of the army's “cultural Sundays” initiative.

“A group of soldiers was standing with their bags near the bus. I had just let them off. The truck drove into the group of soldiers, ran over them and kept going. The soldiers shot at the driver. He reversed and ran over them again,” Moshe Aharon, the driver of the bus told Army Radio.

The driver of the truck has been identified as a resident of the capital’s Jabel Mukaber neighbourhood.

Israel’s police chief Roni Alsheich told reporters the attacker was from an Arab neighbourhood in east Jerusalem and forces had no advance warning. He refused to elaborate, and a gag order was placed on further details pending an investigation.

Security camera footage shows the vehicle barreling into a crowd of soldiers gathered next to a bus.

After smashing through the crowd at a high speed, the vehicle quickly backs up, apparently to run over more people.

An instructor who was escorting the soldiers told Israeli media that he shot and killed the driver before anyone else was hurt. Other soldiers also opened fire, he said.

It ranks as one of the deadliest in a more than year-long wave of Palestinian shooting, stabbing and vehicular attacks against Israelis that had slowed of late.

The latest incident marks the first Israeli deaths in three months.

Mayor Barkat called on residents to be wary but carry on with their everyday life.