By Allyn Fisher-Ilan
JERUSALEM (Reuters) - An Israeli soldier was shot dead on Sunday during a Jewish festival in the West Bank city of Hebron, a hotbed of tensions where some 500 Israeli settler families live among 100,000 Palestinians.
He was the second Israeli serviceman killed since Friday by suspected Palestinian gunmen as tensions rise in the occupied territory despite a resumption of stalled U.S.-brokered peace talks in July.
Prime Minister Benjamin Netanyahu responded with an order to permit settlers to move into a once disputed building in Hebron near the scene of the attack, saying "whoever tries to uproot us from the city of our fathers will achieve the opposite."
The United States condemned the killing of two Israel soldiers, in a statement issued in New York, where diplomats are gathering for the U.N. General Assembly.
"Such violence and terror are unacceptable, and undermine efforts to establish the positive atmosphere the parties need to progress in peace negotiations," spokesperson Jen Psaki said in an emailed statement.
Israeli military spokesmen said the soldier had died in a hospital in Jerusalem after a suspected sniper shot him in the neck while he was on patrol near the Tomb of Abraham, a Jewish and Islamic holy site in Hebron.
The attack occurred as the city, venerated as the burial site of the biblical patriarch Abraham, was packed with Jewish visitors for a week-long Jewish festival. Israeli media said crowds were ushered away from the site as troops hunted for the perpetrator.
Hebron has long been a flashpoint of the Israeli-Palestinian conflict. Palestinians seek statehood in the West Bank, which Israel captured in a 1967 war.
"Shots were fired near the Machpela Cave," police spokesman Mickey Rosenfeld said earlier, using the Hebrew name for the holy site, adding that police believed the perpetrator was Palestinian.
On Saturday, Israeli authorities said a soldier had been killed by a Palestinian who had lured him to his hometown in the West Bank. A Palestinian suspect has been arrested.
A week ago a Palestinian militant was killed in a confrontation with Israeli forces, the fourth Palestinian fatality since July, and one of about two dozen fatalities since the start of the year.
Netanyahu issued a statement after the soldier died, vowing to "strengthen settlement" in land Palestinians want for a state, and settlers move back into a building Israel evacuated in Hebron in April 2012 after a dispute over its ownership.
About 500,000 Israelis and 2.5 million Palestinians live in the West Bank and East Jerusalem, areas which, along with the Gaza Strip, were captured by Israel in the 1967 Middle East war. Most world powers deem the Jewish settlements illegal and Palestinians fear their presence will deny them a viable state.
Israel disputes this and has vowed to keep major settlement blocs under any eventual peace accord with the Palestinians.
(Additional reporting by Arshad Mohammed)
(Writing by Allyn Fisher-Ilan; Editing by Kevin Liffey and Eric Walsh)