Israeli police have said the blast on Saturday was caused by a Palestinian human bomber.
Paramedics said at least 30 people were wounded, seven of them seriously.
The attacker, a woman from the West Bank town of Jenin, also died.
The blast went off in the Maxim restaurant near Haifa's beach promenade on the southern edge of the city.
The Palestinian resistance group Islamic Jihad later claimed responsibility for the attack.
In a statement, it named the bomber as 27-year-old Hanadi Taysir Jaradat from Jenin, recently the scene of daily raids by the Israeli occupation army.
It said the attack was in revenge for the death of her brother and cousin, Islamic Jihad members who were killed by Israeli troops.
The bomber's brother, 20-year-old Fadi Jaradat, and her cousin Salih Jaradat, who were both Jihad members were killed by the Israeli army in Jenin on 12 June.
Al-Quds Brigades, the military wing of Islamic Jihad, had
vowed in a statement after the 12 June killings that it would avenge the Israeli "crimes".
Quraya condemns bombing
Premier-designate Ahmad Quraya called on all Palestinian factions to immediately halt their attacks on civilian targets.
"We condemn this ugly operation, which targeted Arab and Israeli civilians in the restaurant in Haifa," he said in the statement. "We ask all Palestinian factions, national and Islamic to immediately stop these operations targeting civilians which have a negative impact on the Palestinian cause."
We ask the Israeli government to stop confiscating land and to end its aggression against Palestinian people," he added.
Israel announced on Wednesday that it would push ahead with the next stage of an apartheid wall that at times cuts deep into Palestinian land in the West Bank.
On Thursday, it unveiled plans for hundreds more homes in West Bank settlements.
Appeal to quartet
Senior Palestinian official Saib Arakat condemned the bombing and demanded immediate international action to prevent a further escalation in violence.
An official in Israeli Prime Minister Ariel Sharon's office said the Palestinian Authority must take responsibility for the blast for failing "to dismantle terrorist organisations".
"The Palestinian National Authority condemns this kind of attack in Haifa," Arakat told AFP.
"We demand that the United States and the quartet intervene immediately to stop a further escalation and keep the road map on the table."
The road map is the peace plan backed by the United States, United Nations, European Union and Russia - known as the quartet.
Israel blames PA
An official in Israeli Prime Minister Ariel Sharon's office said the Palestinian Authority must take responsibility for the blast for failing to "dismantle terrorist organisations".
The attack came despite a blanket closure Israel had imposed on the West Bank and Gaza Strip, ahead of the Jewish holiday of Yom Kippur, or Day of Atonement, which runs from sundown on Sunday to sundown on Monday.
Haifa has been the site of six
human bombings in three years
Saturday's attack was the first bombing operation since twin attacks killed 15 people on 9 September, near an army base outside Tel Aviv and at a Jerusalem coffee shop.
After the 9 September bombings, Israel threatened to "remove" Palestinian leader Yasir Arafat, either through expulsion or assassination, but did not say when it would take action.
It is widely believed that a major attack with many casualties could trigger Israeli measures against Arafat.
Saturday's bombing prompted the Palestinian Liberation Organisation to issue an appeal to the international community to prevent Israel from taking action against Arafat.
"The executive committee appeals to the world ... to prevent the Israel government committing new crimes against the Palestinian people, against the Palestinian Authority, and against President Arafat personally," it said in a statement.