The Israel Radio said the convoy included representatives from Middle East envoy John Wolf's office and the CIA, but US officials said Wolf was not in the region at the time.

A silver, armour-plated jeep used by American diplomats was demolished in the bomb blast, which dug a large crater in the street. Body parts, blood and debris were sprayed meters (yards) away and a black shoe lay on the ground.

Israeli security officials said three security guards attached to the US diplomatic contingent were killed and a diplomat was wounded in the blast at the entrance to the teeming Jabalya refugee camp, a stronghold of Palestinian militants.

A spokesman for the US embassy in Tel Aviv said: "I can confirm there were American casualties." Diplomatic sources later said all of the dead were Americans. The embassy advised all Americans to leave the Gaza Strip for their own safety.

There was no immediate claim of responsibility. Three Palestinian groups -- Hamas, Islamic Jihad and the Popular Front for the Liberation of Palestine -- denied involvement.

Militants, who accuse Washington of heavy bias in favour of Israel, have frequently detonated roadside bombs against Israeli troops and tanks operating in parts of the Gaza Strip.

But it was the first time that a convoy of US diplomats had been targeted in Israel or the Palestinian territories where violence has raged since a Palestinian uprising for statehood began in September 2000 after peace talks stalled.

Palestinian President Yasser Arafat condemned the attack as "an ugly crime that targeted American observers as they were on their mission for security and peace" and he ordered an investigation, the official Palestinian news agency WAFA said.

A Palestinian security source said the US delegation included a cultural attaché on the way to interview students hoping to receive scholarships to study in the United States.

"It is an unacceptable attack against foreign and diplomatic personnel," European Union foreign policy chief Javier Solana said. He called on the Palestinian Authority "to bring to justice the perpetrators of this cowardly act."

Palestinian youths throwing stones forced US investigators to leave shortly after they arrived at the scene near the Jabalya refugee camp. Palestinian policemen at the scene fired automatic weapons in the air to disperse the stone-throwers.

Israeli tanks located half a kilometre from the bomb site fired at the ground and in the air in an apparent attempt to secure the area.