Footage showed dozens of people fleeing from a bus stop during the morning rush hour.
Paramedics who responded said the scene was chaotic and covered in broken glass, with people wounded and lying unconscious on the road and a pavement near the bus stop.
Police said two attackers were shot dead.
Israeli Prime Minister Benjamin Netanyahu has visited the scene and was assessing what happened with his heads of security.
At least 15 people were also understood to have been injured – with six in a serious condition – after the attackers boarded a bus and opened fire as it reached a major intersection at the northern entrance to Jerusalem, on a road that leads to Jewish settlements in east Jerusalem.
Israel Defence Forces soldiers were dispatched and are searching the area for any other suspects. They are also searching several areas on the outskirts of Ramallah.
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Palestinian militant group Hamas praised two Palestinian “resistance fighters” who it said had carried out the attack but it stopped short of claiming responsibility.
Among the dead was a man of about 50 years old, three men aged around 30 and a woman of about 50.
Israel’s foreign minister Gideon Saar said that one of the dead was a pregnant woman.
Other casualties have been evacuated from the scene to hospitals in Jerusalem. A number are said to be in a serious condition with gunshot wounds.
Several people with minor injuries from glass shards were being treated at the roadside.
The war in Gaza has sparked a surge of violence in both the Israeli-occupied West Bank and Israel.
