A US tourist opened fire in the lobby of a hotel in the Israeli Red Sea resort town of Eilat on Friday killing one person, before being shot dead by the security forces, police said.

The shooting, which broke out in the Leonardo Club hotel, came as the southern beach resort was packed with Israelis and tourists enjoying the week-long Jewish holiday of Sukkot, or Feast of Tabernacles.

"An American tourist opened fire in the lobby of the Leonardo Club hotel in Eilat, killing one person," police spokesman Micky Rosenfeld told AFP.

Police said the man had fled to the kitchen and shut himself in, prompting a brief bout of negotiation.

"The shooter barricaded himself into the kitchen and was surrounded by police forces, including special units, who asked him to turn himself in," police spokeswoman Luba Samri told AFP.

"He opened fire during the negotiations with police. They fired back and killed him," she said.

She said the attacker had snatched a gun from a security guard before shooting dead another hotel employee.

Two other tourists were taken to hospital suffering from shock, she said.