The violence, the first major attack in Jerusalem since March, wreaked havoc in the heart of downtown. Hundreds of people fled in panic through the streets as medics treated the wounded.
Three Palestinian militant groups took responsibility for the attack, but the claims could not be independently verified and Israeli police referred to the attacker as a "terrorist" acting on his own.
The attack took place in front of a building housing the offices of The Associated Press and other media outlets. British Broadcasting Corp. footage captured the huge front loader crushing a vehicle and an off-duty soldier killing the perpetrator by shooting him in the head several times at point-blank range as onlookers screamed.
Israel's national rescue service confirmed three deaths, and the bodies lay motionless on the ground covered in plastic.
Hen Shimon, a 19-year-old soldier, said the whole scene was a "nightmare."
"I just got off the bus and I saw the tractor driving and knocking everything down in his path," she said. "Everything he saw he rammed. He had a gun and started shooting at a police officer."
Esther Valencia, a 52-year-old pedestrian, said she barely escaped the carnage.
"He almost hit me. Someone pushed me out of the way at the last moment. It was a miracle that I got out of there."
Eyal Lang Ben-Hur, 16, was in a bus when the driver yelled out, "Get out of the vehicle! Everyone out!" People fled in a panic, he said, and the bus was hit an instant later.
The attack occurred in an area where Jerusalem is building a new train system. The project has turned many parts of the city into a big construction zone.
Wednesday's attack represented a departure from militants' previous methods, which were mostly suicide bombings and shootings.
During the second Palestinian uprising, which erupted in late 2000, Jerusalem experienced dozens of suicide bombings and other attacks. The city has been largely quiet in the past three years, though sporadic attacks have persisted. In March, a Palestinian gunman entered a Jerusalem seminary and killed eight young students.
The three organizations that took responsibility for the attack included the Al Aqsa Martyrs' Brigade, which is affiliated with Palestinian President Mahmoud Abbas. The other two are the Galilee Freedom Battalion, which is suspected of being affiliated with Lebanon's Hezbollah guerrillas, and the Popular Front for the Liberation of Palestine, a fringe left-wing militant group.
The Hamas militant group, which runs the Gaza Strip and is currently maintaining a fragile cease-fire with Israel, said it did not carry out the attack but nevertheless praised it.
"We consider it as a natural reaction to the daily aggression and crimes committed against our people in the West Bank and all over the occupied lands," said Hamas spokesman Sami Abu Zuhri.
Despite the Palestinian claims of responsibility, Israeli police chief Dudi Cohen said the attacker appeared to be acting alone.
"It looks as if it was a spontaneous act," he said.
Abbas aide Saeb Erekat condemned the violence.
"We condemn any attacks that target civilians, whether Israelis or Palestinians, and President Abbas has been consistent in his position to condemn any attacks, including the one in west Jerusalem, that target civilians," he said.
Major Israeli retaliation appeared unlikely given the police chief's claim that the attacker acted alone and the Jewish state's desire to maintain the Gaza cease-fire and to support Abbas' security forces in the West Bank.
Police spokesman Shmuel Ben-Ruby said the man was an Arab from east Jerusalem and had a criminal background. Channel 1 TV, citing police, reported that the attacker, a man in his 30s, worked for a construction contractor. Police chief Cohen said the attacker was the father of two children.
In contrast to West Bank Palestinians, Arab residents of Jerusalem have full freedom to work and travel throughout Israel. Many Jerusalem Arabs work in the construction industry, possibly helping the attacker to easily gain control of a construction vehicle.
About two-thirds of Jerusalem's 700,000 residents are Jews, and the rest are Palestinians who came under Israeli control when Israel captured their part of the city in 1967. Jerusalem's Arabs are not Israeli citizens but hold Israeli ID cards that allow them freedom of movement in the city and throughout Israel.
Israel's national rescue service said at least 45 people were wounded in Wednesday's attack. At one point, a paramedic lowered a screaming baby into an ambulance.
Wounded people sat dazed on the ground amid piles of broken glass and blood stains on the street. The driver of the construction vehicle was slumped motionless over the steering wheel.
A half-dozen cars were flattened and others were overturned by the Caterpillar vehicle. A bus was overturned and another bus was ways to strike at the heart of the Jewish people here in Jerusalem," Lupolianski said.
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Associated Press Writer Aron Heller contributed to this report.
