Israel's Foreign Ministry said on Monday that a security guard at the country's embassy in Jordan opened fire, killing two Jordanians, after being attacked by one of them with a screwdriver.
The incident took place on Sunday evening, at a residential building used by embassy staff.
Israeli media said Jordan has demanded to conduct an investigation and has prevented Israeli embassy staff from leaving the premises. Jordanian government officials were not immediately available for comment.
Israel's Foreign Ministry did not refer to such demands in its statement, but said the guard has diplomatic immunity, according to international conventions.
The shooting came at a time when Israel and Jordan were conducting intense contacts over an escalating crisis at a contested Jerusalem shrine that is revered by Muslims and Jews. Jordan is the Muslim custodian of the site.
Israel's security Cabinet was meeting from late Sunday until the early hours of Monday to discuss the crisis at the shrine, and was briefed during the meeting about the incidents at the embassy, the Foreign Ministry said.
Israeli Prime Minister Benjamin Netanyahu spoke by phone to Israel's ambassador in Jordan, the ministry said.
The ministry said the incident began when two Jordanian workmen arrived at the residential building to replace furniture.
It said one of the workers, identified by Israeli media as a 17-year-old, attacked an Israeli security guard with a screwdriver.
The guard opened fire, killing the teen, the media reports said. A second Jordanian, the owner of the building, was hit by gunfire and later died of his injuries. Jordanian police said the building owner was a physician.
The Israeli guard was lightly hurt, the media reports said.
The incident is bound to further inflame Jordanian public opinion against Israel and complicate efforts to defuse tensions over a contested Jerusalem shrine.
On Friday, thousands of Jordanians marched in the streets of the capital Amman to protest against Israeli policies at the shrine, known to Muslims as the Noble Sanctuary and to Jews as the Temple Mount.
The tensions over the Muslim-administered shrine erupted after Israel installed metal detectors at the gates, in response to a shooting attack from there that killed two Israeli policemen.
Muslim religious leaders have alleged that Israel is trying to expand its control at the site under the guise of security, a claim Israel denies. The tensions have led to mass prayer protests and Israeli-Palestinian violence.
Israel and Jordan signed a peace deal in 1994, but the agreement remains deeply unpopular in the kingdom where many residents are of Palestinian origin. Jordan and Israel have close security ties, but frequently clash over Israeli policies at the Jerusalem shrine.
Jordan's ruling Hashemite dynasty, said to trace its ancestry to Prophet Muhammad, draws much of its legitimacy from its role as protector of the shrine.