Israel Defense Forces reconnaissance and special infantry units on Thursday night launched a search and arrest operation in the West Bank city of Bethlehem, Army Radio reported.

About 20 army vehicles entered Bethlehem, following seven months of Palestinian security responsibility, residents and military officials said.

A Palestinian policeman from a refugee camp next to Bethlehem blew up a Jerusalem bus on Thursday, killing 10 passengers and wounding 50.

Also Thursday night, IDF troops demolished six houses belonging to Hamas activists the army said was responsible for the attack at Ein Yabrud in which three soldiers were killed, Israel Radio reported.

The suicide bomber's family members evacuated their house overnight in fear that the IDF would destroy it in retaliation forr the attack, according to the report.

Before dawn Friday, IDF forces instructed Palestinian security officers to abandon checkpoints outside Bethlehem, and troops moved into the city, residents said.

Military officials, speaking on condition of anonymity, would say only that an operation was in progress.

There were no reports of exchanges of fire or casualties. The operation appeared to be limited, possibly aimed at arresting suspects and destroying the house where the bomber lived.

Israel has decided to refrain from launching a harsh response after Thursday's suicide bombing.

Prime Minister Ariel Sharon met with senior security officials on Thursday night to discuss Israel's response to the attack.

Earlier Thursday, Defense Minister Shaul Mofaz ordered the security establishment not to renew a closure on the West Bank and Gaza Strip following the suicide attack.

Mofaz explained that the decision not to impose a closure on Palestinian cities was made so as not to make the lives of the Palestinian public harder. He said that action would be taken specifically against terror organizations.

Mofaz said that Israel is committed to a policy of "differentiating" between civilians and those who carry out terror attacks. At the time of the bombing, at approximately 9 A.M., Mofaz was meeting with U.S. envoys David Satterfield and John Wolf, to discuss easing conditions for the Palestinian population. The decision to refrain from imposing a general closure on the territories came despite opposition expressed by Shin Bet chief Avi Dichter, who recommended that stricter measures be taken.

The blast took place on Egged bus No. 19, on the corners of Arlozorov and Gaza streets, very close to the official residence of Prime Minister Ariel Sharon, who was not in the building at the time. The site of the explosion is also close to the Moment Cafe, where 13 people were killed in a March 2002 suicide bombing.

Some 31 people wounded in the attack were still hospitalized Thursday night, 12 of them in serious condition, Channel Two reported. The rest sustained moderate to light injuries. All of the wounded were taken to hospitals in the Jerusalem area.

The names of eight of the ten people killed in the attack have been released: Eli Tsfira, 48; Chana Anya Bunder, 38; Baruch Hondiashvilli, 38; Dana Itach, 24; Avraham (Albert) Balhasan, 28; Natalia Gamril, 50; Octovian Floresco Viorel, 42; Rose Bona, 39 from Jerusalem; Yehezkel Goldberg, 42, from Betar Ilit.

Al Aqsa Martyrs' Brigades claims attack The Fatah-related Al Aqsa Martyrs' Brigades claimed responsibility for the attack. Palestinian sources named the bomber as Ali Yusuf Jaara, a 24-year-old Palestinian policeman from Bethlehem.

Palestinian security officials said later Thursday that the bomber was a member of the Palestinian police, from the West Bank city of Bethlehem.

The bomber was in the back of the bus when the explosives were detonated, said Jerusalem Police Commander Mickey Levy.

"It was a very serious attack on a bus packed with passengers," Levy said. "According to what we know at the moment... we're talking about a suicide bomber."

The blast tore apart the bus, turning it into a twisted wreck. Shattered glass lay on the ground. One side of the bus had been blown out and the back half of the roof was blown off.

Channel Ten quoted the driver of the bus, who was wounded in the attack, as saying that he did not see anyone suspicious get on the bus.

Bus driver calls scene 'a nightmare' "It was like a pastoral scene - the sun was shining and it was serene outside - but the bus was a nightmare. Bodies were sitting in their chairs, burnt, motionless," said witness Drora Resnick.

"There were burnt children sitting together. People started rushing off the bus, but they were still there, not moving."

A resident of the area, who only gave his first name, Ofer, said he heard the blast and ran to the scene.

"I saw sights that we are now becoming used to seeing: a bus with its back part cut off, people jumping from the bus," he told Channel 10.

Stephane Ben Shushan, who owns a chocolate store in the upscale neighborhood, was walking to work and was outside his shop, about 10 meters away, when the explosion went off.

"It's indescribable," he said. "It's a real nightmare, you can smell the blood." He said there was heavy traffic and the bus was driving slow at the time.

The explosion came just two days after senior Egyptian officials made another attempt to win a pledge from Palestinian militants to halt attacks on Israelis.

The attack was a further setback to international efforts to bring about a resumption of peace talks. The U.S.-led road map peace plan has been stalled almost since its inception in June of last year.

PA condemns bombing The Palestinian Authority condemned the bombing, and senior Palestinian negotiator Saeb Erekat called for a renewal of "a meaningful peace process." Otherwise, he said, "violence will breed violence, bullets will breed bullets."

The last suicide bombing in the capital ahead of Thursday's attack took place on September 9, 2003, when seven people were killed and dozens wounded in suicide bombing at the popular Cafe Hillel on Emek Refaim Street.