Palestinians shot dead two Israelis in a vehicle in the north of the occupied West Bank on Thursday, an Israeli security source said.

The attack took place between the Jewish settlements of Itamar and Eilon Moreh, near the Palestinian city of Nablus.

Four children in the vehicle were lightly wounded and taken to hospital, the same source said.

The two dead were the children's mother and father.

Israeli security forces flooded the sector where the incident occurred, an AFP journalist said.

The attack came after court documents showed Israel was considering authorising wildcat settlement outposts in the West Bank near a village where a firebombing killed an 18-month-old Palestinian boy and his parents.

It also came after Israeli Prime Minister Benjamin Netanyahu offered in a speech at the UN General Assembly to resume direct talks with the Palestinians.

The premier said he was prepared to "immediately resume direct peace negotiations" without preconditions, although the Palestinians condition a resumption of dialogue on an end to settlement building and the release of prisoners.

On Wednesday, Palestinian president Mahmud Abbas told the Assembly Israel's refusal to release prisoners and stop settlement activity meant the Palestinians could not be bound by past agreements between the two sides.

However, after Thursday's attack Israel's hardline Education Minister Naftali Bennett issued an angry statement.

"The time for talks (with the Palestinians) is over," he said. "It is time to act."

"A people whose leaders support murder will never have a state."

Source: AFP