The motive for the shooting spree, which took place on a busy main street, was not immediately clear, police said. Media reported the assailant was a member of Israel's Arab minority and called it a nationalistically motivated attack but police refused to comment, saying it was still investigating.
Israeli Channel 10 TV showed CCTV footage of the incident, obtained from a health food shop next to the bar. It shows a man with short hair, glasses and a black bag over his shoulder scooping up some nuts, putting them in a plastic bag, then emptying them back. The footage then shows the man walking toward the entrance of the store, placing his backpack on a shopping cart and taking a gun out of it. He then steps outside and starts shooting, after which he runs away.
Channel 10 also later spoke to a man it identified only as Ahmed who it said was a relative of the shooter. The man described the shooter as "traumatized" after a cousin was killed by police in 2006, and who had served time in Israeli prison after allegedly grabbing an officer's gun.
Residents of the village of Arara in northern Israel told media they recognized the shooter and said he was from their village. They condemned the attack and called on him to turn himself in.
Police spokeswoman Luba Samri said five people were wounded in the attack, two of whom died in hospital. She said a massive manhunt was underway for the shooter. Large police forces were deployed at the scene.
The attack comes amid more than three months of almost daily Palestinian attacks against Israeli civilians and soldiers. On the Israeli side, 21 people have died, mostly in stabbings, shootings and car-ramming attacks. That's without counting the victims in Friday's attack.
At least 131 Palestinians have been killed by Israeli fire, 90 of them identified by Israel as assailants. The rest died in clashes with security forces.
Tel Aviv Mayor Ron Huldai visited the wounded in hospital and later said he spoke with those who were able to talk. He said that inside the bar, "friends were celebrating a birthday and a man opened fire at them from the outside."
Later, police said an Arab Israeli man was found near the shooting scene with a gunshot wound and later died of his wounds in hospital. The police said an investigation is underway and that it is not clear whether that man is in any way connected to the bar shooting.
Israel's Arabs, who make up a fifth of the country's 8.4 million population, enjoy full rights but have long complained of discrimination and unfair treatment in areas such as housing and employment opportunities.
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