AL QUDS, Jan 29: A suicide bomber blew up an Israeli bus in Al Quds on Thursday, killing 10 people in the deadliest such attack in four months, as Israel and the Lebanese Shia guerrila group Hezbollah carried out a prisoner exchange.

Al Aqsa Martyrs Brigades, linked to President Yasser Arafat's Fatah faction, issued a letter left by the bomber in which he said he was avenging an Israeli raid in Gaza on Wednesday that killed eight Palestinians.

The explosion on Bus 19 peeled back part of its roof, shattered windows and scattered body parts up to 15 metres (50 ft) away on Gaza Street near Prime Minister Ariel Sharon's official residence.

Sharon was at his ranch in southern Israel at the time. Police said the bomb was packed with nuts and bolts to maximise casualties. Dozens of wounded were rushed to hospital.

"It was like a pastoral scene - the sun was shining and it was serene outside - but the bus was a nightmare. Bodies were sitting in their chairs, burnt, motionless," said witness Drora Resnick.

"There were burnt children sitting together. People started rushing off the bus, but they were still there, not moving." Hours after the blast, Israel released some 400 Palestinian prisoners into the West Bank and Gaza, and returned over its border with Lebanon the bodies of 59 Lebanese and Arab fighters killed during a 22-year occupation of southern Lebanon.

A second aircraft arrived in Beirut with 29 mostly Lebanese prisoners released by Israel. Thousands of people waving Lebanese and yellow Hezbollah flags lined up to give them a hero's welcome.

The Al Quds bombing came in the midst of a visit by US envoy John Wolf, who met this week with Israel and Palestinian officials to try to revive a violence-stalled peace "road map".

The White House repeated a call for Palestinian Prime Minister Ahmed Qurie, who condemned the bombing, "to take steps to dismantle the terrorist infrastructure" in the West Bank and Gaza Strip.

David Baker, an official in Sharon's office, said the attack showed why Israel was building a barrier in the West Bank. Israel says the barrier will keep out suicide bombers who have killed hundreds of Israelis since the start of a Palestinian uprising in September 2000. Much of the international community has criticised the project, which Palestinians call a land grab.

Two prominent Lebanese militiamen, Sheikh Abdel-Karim Obeid and Mustafa Dirani, who were abducted in 1989 and 1994 and held as bargaining chips for Arad, were among those repatriated.

Israel says Lebanese guerillas handed Arad to their Iranian backers and he might still be alive. Iran says it has no information on his fate.-Rueters