Israeli police have launched a massive manhunt after a gunman killed two people and wounded at least seven others in an attack on a Tel Aviv bar.

The incident took place in the centre of the city, at the Simta bar on the corner of Dizengoff Street and Gordon Street.

The gunman is thought to have targeted a group celebrating a birthday, firing an automatic weapon before fleeing.

Security camera footage showed the suspect pulling a weapon from his backpack and shooting.

“All possible angles are being investigated,” Luba Samri, a police spokeswoman, said. “Large-scale police forces are conducting searches for him.”

According to Israel media, the suspect was identified as an Israeli Arab, and security officials believe the shooting may have been a terrorist attack.

The casualties were taken to Ichilov Hospital in Tel Aviv. Two of the wounded are thought to be a in serious condition.

The two dead were identified as Alon Bakal, 26, manager of the bar, and 30-year-old Shimon Ruimi from the southern Israeli city of Ofakim.

It is thought that about 30 shots were fired during the attack.

Police are conducting a house to house search for the gunman and have cordoned off areas of the city.