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A man took hostages in the Turkish Embassy in Tel Aviv on Tuesday after shots were fired outside, Israeli police and a Foreign Ministry official said.
Security officers reportedly shot the man but it was unclear if he was dead or just injured.
Turkey's news agency said embassy security guards captured the attacker. The report quoted anonymous officials from the embassy.
A newspaper identified the attacker as a Palestinian who tried to seek asylum at another embassy four years earlier.
"This is a hostage situation," Israeli Foreign Ministry spokesman Yigal Palmor told The Associated Press. Channel 2 TV played a recording of a phone call it said came from the attacker. "I have two hostages," he said. "I will blow up the embassy."
A lawyer told Israel Radio, however, that the hostages, the consul and his wife, had escaped.
Israel Radio reported from the scene that rescue workers with stretchers tried to enter the seaside embassy compound but left without bringing out any wounded.
The Israeli Maariv newspaper said the man called the paper, identifying himself as Nadim Injaz, a Palestinian who sought asylum at the British Embassy in Tel Aviv in 2006.
He said he had a flammable liquid and threatened, 'I will kill any Jew that enters.'
Lawyer Shafik Abuani told Israel Radio that he talked to the man three times by telephone, trying to calm him down.
The lawyer said Injaz threatened to burn the embassy down if he is not granted asylum.
It was unclear what his relationship with the hostage-taker was.
Dozens of police and paramedics surrounded the three-storey building as night fell.
The numbers of hostages involved was unclear, but police confirmed it was an ongoing incident.
A man who had undressed near the embassy was shot dead by a man who then fled the scene, police spokesman Alex Keglesky said on Tuesday.
Keglesky ruled out, for the time, that the shooting was an attack against the Turkish embassy.
But local news sources quoted an official police statement as saying that "another incident" could still be ongoing inside the embassy compound.
An initial investigation into a shooting incident at the Turkish embassy in Tel Aviv on Tuesday revealed that a Palestinian man who entered the embassy seeking asylum had threatened the embassy staff and had been shot in his leg. The man was lightly hurt.
Seven hours after he forced his way into the embassy, the attacker was escorted out of the embassy and bundled into an Israeli ambulance. Wearing a light blue shirt and limping slightly from an apparent gunshot wound, he raised his arms briefly and shouted before Israeli police and paramedics subdued him.
He said he was demanding asylum in Turkey and protection from "these murderers the Zionists, the murdering Jews". At the same time, he said that Palestinian leaders, including Mahmoud Abbas, "should die."