An Arab man was killed and 10 other persons were injured today when a rocket fired from a hand-held antitank rocket launcher struck an Arab bus just southwest of Jerusalem's Old City.

The attack, one of the boldest in recent memory in this city, apparently was carried out by militant Jews seeking revenge for the shooting death last week of two Jews and in the hope of forcing the government to take tougher measures against Arab violence.

The incident was condemned immediately by senior Israeli officials, including Prime Minister Shimon Peres, whose spokesman quoted him as "expressing revulsion for all forms of terrorism" and vowing every effort to capture the perpetrators. Defense Minister Yitzhak Rabin condemned what he called the "detestable attack on innocent civilians."

The rocket was fired from a heavily wooded slope above a main road that runs south from the Old City toward Bethlehem. The rocket struck the roof of the crowded bus just above its side door at about 3:30 p.m. today as the vehicle was beginning to climb a steep hill on its regular route from East Jerusalem to Bethlehem.

Moshe Alexandroni, a police spokesman at the scene, said initial evidence indicated that the attack was carried out by one man hidden in the woods. He said the rocket launcher, a U.S.-made weapon used by both the U.S. and Israeli armies, was found in the woods.

Israeli radio said tonight that three Jews near the scene had been detained and were being questioned. The radio identified the dead passenger as Jamal Ismael Mattour, 20.

According to a police spokesman, police also found a note in Hebrew with the rocket launcher. The note said the attack was in revenge for the killing last week of two Jewish students, Revital Seri, 20, and Ron Levy, 24, whose blindfolded bodies were found tied to a tree in a field near the Cremisan Monastery winery outside of Bethlehem. Levy's father condemned today's attack on the bus.

The note also vowed that similar attacks would continue until the government imposes the death penalty against Arab terrorists, according to police accounts.

A 22-year-old Palestinian resident of the Dheisheh refugee camp south of Bethlehem has been charged in the deaths of the Jewish students. According to some published accounts, the man, Issa Nimr Jibrin, killed the two for anti-Israeli political motives.

In a radio interview shortly after the attack today, Police Minister Haim Bar-Lev said, "This is an incident that no democratic society can accept, and we won't accept it." He said the note, which he said was written in "primitive Hebrew," made it clear that "these are Jews" dissatisfied with government security measures in the Israeli-occupied West Bank and with what they perceive as the lack of severity of punishment imposed on Arabs convicted of crimes against Jews.

In the aftermath of the deaths of the two Jews, militant Jewish settlers in the West Bank and their supporters in Israel's parliament have begun to press demands for use of the death penalty against Arabs as a means to improve security in the territory.

Capital punishment exists under Israeli law but has been used only once in the country's history -- in 1962 against convicted Nazi war criminal Adolf Eichmann. Israeli officials long have argued against use of the death penalty in terrorism cases for fear of turning terrorists into "martyrs" and because a terrorist facing certain death is unlikely to surrender when cornered by security forces.

Today's incident came against the backdrop of the continuing trial here in the so-called Jewish underground case. The suspects in that case, who are defended and admired by some Israelis, are charged with waging a campaign of terror against Arab targets, including the attempted murder of three West Bank mayors and the slaying of three Palestinian students at the Islamic College in Hebron.

More than 20 suspects in the case were arrested and charged last spring after police discovered bombs on five Arab buses in the same East Jerusalem terminal from which the vehicle that was the target of today's attack left.