Israel's Channel 10 TV showed cellphone video of what it said was the attack, with the yellow excavator slamming its large shovel into the bus. Police spokesman Micky Rosenfeld said a police officer in the area opened fire and killed the attacker. A pedestrian also was killed, said Jerusalem district police chief Yossi Piranti.
"Because of the quick reaction of the police an even graver incident was avoided," Piranti said.
Earlier Monday, an Israeli airstrike killed a leader of the Islamic Jihad militant group.
The group said that its commander in the northern part of the strip, Daniel Mansour, died when the Israeli strike hit his home just before dawn Monday. The Islamic Jihad group is an ally of Hamas, which controls the Gaza Strip. However, The Wall Street Journal reported that Islamic Jihad may be using the present fighting to increase its clout in the region.
U.S. and Israeli officials told the paper that Islamic Jihad has closer ties to Iran than Hamas, and said the group might have been pressured by Iran to continue fighting in defiance of any truce.
The Israeli military said the cease-fire, which began at 10 a.m. local time (3 a.m. ET), would not apply to areas where troops were still operating and where they would respond to any attacks.
A senior Israeli official told Fox News Monday that the country is considering pulling out from Gaza without a cease-fire agreement with Hamas.
Israel already has been drawing down its ground operation since the weekend but has kept up heavy aerial, offshore and artillery bombardments of the strip. The Gaza war, now in its fourth week, has left more than 1,800 Palestinians and 60 Israelis dead. However, it is unclear how many of the Palestinian dead are civilians.