JERUSALEM -- A Palestinian blew himself up in an oft-targeted shopping area in the heart of Jerusalem on Thursday in the second suicide bombing in two days, killing three Israelis and derailing a round of U.S.-brokered truce talks.

Moments after the late afternoon blast, the dead and injured lay on a blood-splattered pavement on King George Street, amid glass shards and twisted awnings from a hat boutique, a shoe store and a candy shop.

A policeman screamed for help. Passers-by knelt over a wounded young boy. More than 60 people were injured.

In a rare step, Palestinian leader Yasser Arafat personally condemned the bombing -- carried out by a militia linked to his Fatah movement -- and promised to take immediate steps to prevent such attacks.

Israel held Arafat directly responsible, saying he has done nothing to rein in militants, despite his stated support for a truce and repeated appeals from President Bush and others. "Arafat is taking no action whatsoever, even the most minimal action," said Raanan Gissin, an adviser to Prime Minister Ariel Sharon.

U.S. truce negotiator Anthony Zinni met with Sharon and senior Cabinet ministers late Thursday in an apparent effort to rescue his mission. Thursday night's scheduled talks between Israeli and Palestinian security officials were called off -- by Israel, the Palestinians said -- and it was not clear whether the meeting would resume.

Retaliation feared

Also unclear was whether Israel would retaliate for the bombing. In an effort not to disrupt Zinni's mission, Israel refrained from military action after Wednesday's bombing on a commuter bus that killed the assailant and seven passengers.

"We must act," Israeli Interior Minister Eli Ishai said Thursday. "We are in a war, and the Americans must understand that."

The State Department announced that it had begun steps earlier this week to declare the Al Aqsa Brigades -- the Fatah-linked militia that claimed responsibility for the bombing attack -- a foreign terrorist organization.

The move would authorize freezing any bank accounts in the United States and denying visas to Al Aqsa Brigade members.