Anonymous security officials said Shaul Mofaz, the Israeli defence minister, has cited "clear evidence" about Syrian and Iranian involvement during a high-level security meeting to discuss a response to the attack.
Islamic Jihad claimed responsibility for the Thursday afternoon bombing, which wrecked the Mayor's Shwarma restaurant in a rundown part of Tel Aviv's centre that has been targeted regularly by Palestinian bombers.
The Palestinian President, Mahmoud Abbas, whose Fatah party is facing a stiff challenge from Islamist movement Hamas ahead of parliamentary elections on 25 January condemned the attack saying it was an attempt to sabotage the vote.
Abbas told reporters: "This is sabotage and aimed at sabotaging the elections, not only the elections, but also the security of Palestinians. The culprits must be punished."
The bomber, who witnesses said pretended to be a peddler selling disposable razors, walked into the restaurant and blew himself up, even though most of the customers were sitting at sidewalk tables, relatively far from the bomber.
Twenty people were wounded, one seriously, and the 22-year-old bomber was killed.
This was the seventh such bombing aimed at Israelis since Palestinian fighters declared an unofficial truce in February 2005. Islamic Jihad claimed responsibility for all six in Israel and one at a West Bank army checkpoint.
Islamic Jihad identified the bomber as 22-year-old Sami Abdel Hafez Antar from the West Bank city of Nablus.
The group released a video made by the bomber before the attack. Brandishing a rifle and posing before a black Islamic Jihad flag, he said he carried out the bombing in response to Israeli attacks on civilians and militants.
In other violence, Israeli soldiers shot and killed a Palestinian who was about to throw a firebomb on a highway in the southern West Bank late on Thursday, Palestinians and military officials said.