The rioting in Hebron raged for more than five hours, with hundreds of protesters hurling stones and firebombs at the Israelis, who fired back tear gas and rubber bullets.
In Jerusalem, Prime Minister Benjamin Netanyahu appealed for an end to the rioting and warned that one more major terrorist attack could scuttle the peace process.
Palestinian police tried to prevent the protests from spilling over from the Palestinian-controlled part of the city into the enclave still held by Israel, where the shooting occurred - only to be pelted with stones by their own people.
The violence in Hebron - where 500 Jewish settlers live in uneasy coexistence with 130,000 Palestinians - came amid Arab dismay over the apparent failure of Monday's Washington summit between President Clinton and Netanyahu.
The prime minister, however, insisted that "interesting ideas" on how to restart talks had come out of the summit. Further progress, he said, depended on the absence of further violence.
The escalation in the month-long crisis deepened fears that prospects for peace are dying.
"It's like the worst days of the intefadeh," said Aharon Dombe, a spokesperson for the West Bank settlers, referring to the 1987-1993 Palestinian uprising that marked a low point in Israeli-Palestinian relations.
Although yesterday's fighting was the bloodiest, Palestinians and Israeli soldiers have battled in the streets of the West Bank almost daily since Israel broke ground March 18 for the Har Homa housing project in east Jerusalem, the sector which the Palestinians want as their capital.
Netanyahu accuses Arafat of orchestrating the riots and authorizing militant attacks, including a suicide bombing in Tel Aviv last month that killed three Israeli women.
Clinton urged both sides to prevent the violence from stopping progress toward peace. "We've just got to keep going," he said yesterday.
But in the Middle East, rhetoric was moving in the other direction.
Arafat spokesperson Marwan Kanafani accused Netanyahu of having "blood on his hands" after yesterday's shootings. Arafat himself, speaking before the shooting, said Netanyahu's refusal to suspend settlement building means "he does not want peace."
There were conflicting reports about the shooting in Hebron that triggered yesterday's riots.
Palestinians said the attack was unprovoked, while Israelis insisted it was brought on by Palestinians who sprayed two Jewish seminary students with tear gas as they walked to the Tomb of the Patriarchs. Both students had tear gas burns, police spokesperson Linda Menuchin said.
The students opened fire with Uzi submachine guns, Hebron police commander Benny Baharon said. One shot hit Assam Arafeh in the chest, killing him, Palestinian police and hospital workers said.
Desperate to quell anger over the shooting, Israeli forces announced over loudspeakers that authorities had detained both Jews in the shooting.
But the assurance had no effect on Palestinians' anger. Rioters lobbed gasoline bombs and rocks, injuring at least five Israeli soldiers and several Palestinian policemen.
Israeli troops fired tear gas and rubber bullets, injuring about 100 Palestinians badly enough to require hospital treatment.
One 16-year-old boy wounded in the rioting died in surgery, the metal kernel of a rubber bullet lodged in his brain.
A 24-year-old man died after hours in a coma, also from a rubber bullet that pierced his eye and entered his brain, hospital workers said.
The rioting was the deadliest since Israeli-Palestinian clashes in September in which 80 people died in brawls that deteriorated into gun battles between Palestinian police and Israeli soldiers.
It was the first time Hebron settlers were involved in a shooting since most of the city was handed to the Palestinians in January.
The Israeli army imposed a curfew on the center of Hebron on Tuesday. In one of the day's few positive signs, Maj. Gen. Uzi Dayan, head of the Israeli army's central command, praised Palestinian police for working with Israeli troops to control the violence.
The crowds of angry protesters disbanded late yesterday afternoon. Sporadic stone-throwing continued into the evening, when more than 700 people marched in the funeral procession of the first victim.
The body, wrapped in a Palestinian flag, was carried to the grave by uniformed Palestinian police, who fired a 21-gun salute. The mourners waved Palestinian flags and banners, and shouted down Palestinian Transportation Minister Ali Qawasmeh when he tried to speak.
They yelled: "Let the olive branch fall - and the gun rise!"
AP PHOTO
A group of Israeli soldiers in riot gear take cover behind a pillar in Hebron yesterday as a molotov cocktail smashes into it.