A 19-year-old resident of East Jerusalem injured 17 people late on Monday night when he ploughed his car into a crowd of soldiers in Jerusalem.
Kasem Mugrabi, from the Jebl Mukaber neighbourhood was shot dead by an off-duty IDF officer within seconds.
The incident took place in Kikar Tzahal, near Jaffa Gate and was the third such attack since another East Jerusalem resident killed three people in a bulldozer rampage in July.
Monday's assailant had no previous security records.
According to Army Radio, nine wounded from the attack were still being treated on Tuesday morning.
Defence Minister Ehud Barak called for the legal process to be speeded up so that the homes of such attackers could be demolished rapidly after such incidents.
Israeli authorities refused to allow the family of the dead man to erect the traditional mourning tent. They denied the teen had carried out an act of terror and said he had been depressed after being jilted by a cousin he wanted to marry.