One Jordanian was killed and two people, a Jordanian and an Israeli, were wounded in a shooting incident on Sunday in a building inside the Israeli embassy complex in Jordan's capital Amman, police said.
The incident took place as furniture was being replaced at the staff residence.
Relations had been cemented in a peace deal in 1994 but reached crisis point three years later when Mossad intelligence officers tried but failed to assassinate senior Hamas official Khaled Meshaal in Jordan.
Israel's Security Cabinet met for several hours Monday evening in an effort to resolve the crisis over security measures on the Temple Mount and the escalating diplomatic crisis with Jordan.
Local media said authorities prevented embassy staff from leaving the premises in order to question them over the incident, reporting the presence of the interior minister at the scene.
The employees of Israel's diplomatic mission in Amman, Jordan, returned to Israel late Monday night through the Allenby Bridge border crossing.
But the Israeli measures have angered Palestinians and the Muslim world, which regard them as an attempt by Israel to claim further control over the compound, which is the third holiest site in Islam and the holiest site for Jews.
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"I think we have to look now at the broader picture and take into account what happened in Jordan and what is going on Temple Mount and to combine those two problems", he said.
Violence flared between Israeli security forces and Palestinians who are demanding that Israel remove metal detectors installed outside the site after the attack. The Israeli guard was lightly wounded.
The second Jordanian who died was the property owner. Little news from Jordanian police.
That statement made no mention, however, of a parallel agreement to remove the metal detectors at Har HaBayis, which would be replaced by less visible but-highly sophisticated cameras, to be administered jointly by the Israelis, Jordanians and the Wakf.
Earlier in 1997, a Jordanian soldier opened fire at a group of Israeli schoolgirls on a field trip to a joint Israeli-Jordanian tourist resort along the border.
In September 2011, seven months after the popular uprising in Egypt, hundreds of protesters against Egypt's ruling generals, broke into the Israeli embassy in Cairo tearing down large sections of a security wall.