The attack was the deadliest in Jerusalem in years and is bound to ratchet up fears of sustained violence in the city, already on edge amid soaring tensions over a contested holy site.
Israeli police described the assault as a terrorist attack and said the two assailants were apparently Palestinians from east Jerusalem. Hamas, the militant Palestinian group that runs the Gaza Strip, praised the Jerusalem attack but stopped short of claiming responsibility.
Associated Press footage from the scene showed the synagogue, in Jerusalem's ultra-Orthodox Har Nof neighborhood, surrounded by police and rescue workers following the attack.
Wounded worshippers were being assisted by paramedics and a bloodied butcher's knife lay near the scene of the attack.
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"I tried to escape. The man with the knife approached me. There was a chair and table between us ... My prayer shawl got caught. I left it there and escaped," Yossi, who was praying at the synagogue at the time of the attack, told Israeli Channel 2 TV. He declined to give his last name.
The attack comes amid spiking tensions in Jerusalem, which has seen a spate of attacks by Palestinians against Israelis.
At least six people have been killed in Jerusalem, the West Bank and Tel Aviv in recent weeks, prior to today's casualties.
Jerusalem residents have already been fearful of what appeared to be lone wolf attacks using cars or knives against pedestrians. But Tuesday's early morning attack on a synagogue harkens back to the gruesome attacks during the Palestinian uprising of the last decade.