Ambulances rushed to the scene after Wednesday's explosion at the crowded entrance to a felafel stand next to the central bus station. Rescue teams were treating the wounded in a nearby field.
Aljazeera's Palestinian bureau chief, Walid al-Umari, has confirmed that a Palestinian bomber blew himself up at the entrance to a market in southern Hadera, a coastal town between Tel Aviv and Haifa.
At least five people have been killed and about 30 others injured, five seriously, he said.
Israeli police have closed all roads leading to Hadera, he added.
Aljazeera's correspondent in Palestine said the Hadera blast was carried out by Hasan Abu Zaid, a young man from a northern West Bank village.
Abu Zaid, who belonged to Islamic Jihad, has recorded his last testimony on videotape. A statement by Islamic Jihad claiming responsibility for the bombing was sent to Aljazeera.
In the statement, al-Quds Brigades, the military wing of Islamic Jihad, claimed responsibility for the Hadera attack - in response to what it called "the crimes committed by the Israeli occupation against the Palestinian people and the leaders of the resistance".
Islamic Jihad claimed
responsibility for the attack
The statement added: "The last of those leaders was Luai al-Saadi who was assassinated in the West Bank."
Aljazeera's correspondent said the Israeli army had launched a massive military operation and imposed a tight blockade around Tulkarim city in the West Bank.
Israeli sources said the operation aimed at eliminating Islamic Jihad fighters in the wake of the Hadera bombing claim.
Separately, Islamic Jihad spokesman Khadir Habib confirmed to Aljazeera the group's claim of responsibility for the Hadera attack - in retaliation for its leader Luai al-Saadi's assassination in the West Bank.
"We dedicate this heroic operation to the Palestinian people in retaliation for the killing of many martyrs by the Israeli army," he said in an interview to Aljazeera after the blast.
"The Israeli army harvests the results of the killings, terrorism and destruction against the Palestinian people. Israelis should realise that this is what they harvest because of Israeli policies, escalating aggression against our people in the West Bank and Gaza Strip.
Israel struck a building in the
Rafah camp in Gaza on Tuesday
"Israel launches daily terrorist operations against our people," Habib said.
"We, the Islamic Jihad movement and resistance factions, are responsible for retaliation against every Israeli crime against our Palestinian people.
""The Israeli enemy carries out almost daily assassinations against our Palestinian people, despite our commitment to the period of calm," Habib said.
"We still announce our commitment to the period of calm, on the condition that the Israeli enemy is committed to it too. The problem lies in the Israeli enemy that has never been and will never be committed to the calm operation.
"Therefore, this operation comes in retaliation against repeated Israeli crimes, and we have the right to do so."
Habib added: "We are living people that have living resistance factions. We will not give up. We will continue resisting."
For his part, Palestinian Authority (PA) President Mahmoud Abbas condemned the bombing, criticising armed factions for taking the law into their own hands and harming Palestinian interests.
"The Palestinian rocket attacks from Gaza and the suicide bombing today is a violation of the Cairo truce agreement," Abbas said.
"It is forbidden for people to take the law into their own hands.
"It is against our interests and it only increases the violence in this region," he added, while vowing that the Palestinian Authority would "increase its efforts to ensure the continuation of the truce because it is in the interest of both the Palestinian and the Israeli peoples".
The scene after the bombing
at the Hadera town market
Palestinian negotiator Saeb Erikat added his voice to the criticism. "We condemn this attack in Hadera, as we've always condemned suicide attacks on Israeli civilians, and we hope that we will not allow this attack or any attack to undermine the cessation of violence between the two sides.
"At the end of the day, violence breeds more violence and we don't want to go back to this vicious cycle."
Israeli Public Security Minister Gideon Ezra said on Wednesday that the attack showed that the Palestinian Authority was not doing enough to rein in fighters.
"To my sadness the Palestinian Authority is not doing a thing to stop terrorists from getting into Israel," said Ezra.
"Following this attack, I call on the PA to do something, to help stop terrorists from getting into Israel, because it will hurt them, it will hurt their economy and their future ability to enter negotiations" with Israel, he said.
Israel killed Islamic Jihad leader
Luai al-Saadi in Tulkarim
Israel froze contacts with the Palestinian Authority earlier this month after a shooting attack near a settlement bloc in the West Bank in which three settlers were killed.
The army had earlier reported that Palestinians in the Gaza Strip fired a mortar round onto a football pitch in southern Israel on Wednesday causing no casualties or damage.
Palestinian resistance groups agreed to a ceasefire last March. Since then, the level of violence in the Israeli-Palestinian conflict has dropped sharply despite periodic flare-ups.
Questioned by Aljazeera about the PA's stand on operations such as the Hadera attack in the context of peace negotiations with Israel, Islamic Jihad's Habib said: "We are not an obstacle in the way of the Palestinian Authority and its negotiations.
Policemen and rescue workers in
Hadera survey the blast scene
"The authority and the whole world should realise that the problem lies in the Israeli enemy, its escalation and killings against our Palestinian people.
"The whole world should realise this truth and impose pressure on Israel to halt the bloodshed it causes among Palestinians."
Habib said Islamic Jihad would never confront any Palestinian side, whether the PA or resistance factions.
"Our clear confrontation is with the Zionist enemy," he said. "We, the Islamic Jihad, still announce our commitment to the period of calm.
"If the world and the Palestinian Authority are concerned about the period of calm, they should impose pressure on the Israeli enemy to halt its crimes and escalation against our people."