The Palestinian Authority on Monday denied any link with the bomb attack in the Gaza Strip that killed two Israelis, and left 16 injured, according to a source at President Yasser Arafat's office, who asked for anonymity.
The PNA will open a probe in to the incident, he added.
The Israeli army said it holds the Palestinian Authority "responsible" for the attack, AFP said.
"The Palestinian Authority is obviously responsible. They have freed terrorists from prison," army spokesman Yarden Vatikay said, referring to the release last month of dozens of members of Hamas and Islamic Jihad.
"They gave them the green light," Vatikay said.
Foreign Minister Shlomo Ben-Ami told the Israeli radio that the attack had been carried out in Area A, a region under full Palestinian control.
Colonel Pini Levy, deputy commander of the Israeli forces in Gaza, described the attack as a "sophisticated operation, which required advance intelligence information, collaboration in the area and an escape route into Palestinian Authority territory," said the Jerusalem Post newspaper.
"The terrorists' purpose was to get children, and they deliberately chose their objective - a yellow bus of the local council carrying children and teachers," he said.
An atmosphere of tense prevailed in the aftermath of the attack in Gaza, where people are anticipating retaliation by the Israeli forces.
Sources told Albawaba.com that some Palestinian security posts would be evacuated.
Israel has already threatened of avenge.
Cabinet minister, Binyamin Ben-Eliezer, indicated that Israel may strongly retaliate for the bombing, according to Haaretz newspaper.
There is no such thing as there's nothing to be done about it," Ben-Eliezer told the radio, adding that "if this hurts us, it will hurt them (the Palestinians) sevenfold."
Haaretz said that settlers urged Israeli Prime Minister Ehud Barak to "make war on Palestinian militants" in response to the bombing.
"This is a war," settlers' leader in the Gaza Strip, Zvi Hendel, told Israel channel two television.
"Thus, we must make war in return."
Haaretz reported that Barak will convene an emergency session of his security cabinet to weigh Israel's response to the bombing, Barak's senior aide, Gilad Sher, told Army Radio.
"I can say that this will not go unanswered," Sher told the radio. He declined to specify what responses were under consideration, according to the paper.
Sher also said that Barak planned to go to the Gaza Strip to meet with senior army commanders there.
Barak was quoted as calling the incident a "grave and extremely serious terrorist attack," said Haaretz.
In the meantime, three separate groups claimed responsibility for the attack.
AFP reported that a caller saying he represented a group calling itself the "Martyrs of al-Aqsa" claimed responsibility for the attack, while Al-Jazira satellite channel reported that a group calling itself "Palestinian Hizbollah" said it carried out the operation.
The caller told AFP in Gaza the group was not linked to any Palestinian organization but had acted to "avenge the Palestinians killed during the Intifada."
"It was a remote-controlled device against a busload of settlers. There were dead and wounded," he told AFP.
He said the attack took place at 7:14 a.m. (0514 GMT).
The third claim came from the Forces of the Martyr Omar al-Mokhtar, part of a Damascus-based Palestinian organization, which has claimed a number of other attacks in the Gaza Strip, according to AFP.
The group said one of its units had detonated a bomb and attacked the bus and its military escort with home-made grenades and automatic weapons, "killing and wounding many passengers and Israeli soldiers."
"Our forces returned to their bases unharmed," the group added in a communiqué issued in Damascus, said the agency.
Quoting a report by the army radio, Haaretz said that “three members of the militant Islamic Hamas movement carried out the attack.”
There was no independent confirmation of the radio report, said the paper.
The bomb exploded near the Kfar Darum Jewish settlement, reported Haaretz newspaper, adding that six of the injured appeared to be in a critical condition.
The Jerusalem Post quoted an army spokesman as saying that "three terrorists were involved in the attack on the school bus."
"They shot a booby-trapped 120 mm-cannonball at the bus from a distance of some 200 meters," he told the paper.
The two dead were said to be a man and a woman, said the paper, adding that among the wounded are four children and three women.
Large numbers of rescue vehicles and medical evacuation helicopters had transferred the injured to hospitals.
The bus, carrying 30 children, was accompanied by military vehicles, said the paper, adding that it was not immediately known if there were soldiers among the wounded.
The Jerusalem Post newspaper said that large numbers of military troops have been brought to the area where the bomb attack took place.
The area has been closed off to all traffic, added the paper.
According to the paper, the bombing occurred at the spot where the Israeli military had leveled the land in order to provide a better view for the soldiers at a lookout post -- (Several Sources)
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