A gunman opened fire at a popular bar in Tel Aviv killing two and wounding at least three others before fleeing the scene.

The police said the motive for the attack, which took place on a busy main street, was not immediately clear and it was not known if the shooter was Palestinian or if it was a gangland shooting.

Five people were wounded, two of whom died in hospital. Spokeswoman Luba Samri said a massive manhunt was under way. 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. At least 131 Palestinians have been killed by Israeli fire, 90 of them identified by Israel as attackers. The rest died in clashes with security forces.

Tel Aviv Mayor Ron Huldai visited the wounded in hospital and 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".

He said "lessons will be learned" to improve security.

Channel 10 reported that an assault rifle was used in Friday's attack and that about 30 shots were fired. It said police and special forces are going house to house in the area, searching for the gunman.