An American citizen went on the rampage at a hotel in the resort of Eilat opening fire killing one.

"A large number of [Police] units" rushed at the Leonardo Club hotel next to the city Marina facing the Red Sea and told guests to lock themselves in their rooms, a police spokesman said.

Anti-terror police found the gunman hiding in the hotel kitchen. Police said negotiations were attempted but an exchange of gunfire erupted and the shooter was killed.

"We were in the dining room, and suddenly we heard shots fired. Both guest and hotel workers were very frightened. No one understood what was going on. Ten seconds later the dining room was blocked off and we were asked to go to our rooms and stay inside," a hotel guest told Israel newspaper Haaretz.

Police said the gunman, aged 23, was in Israel as part of a program called "Oranim" aimed to encourage young American Jews to visit the holy land. He had entered Israel two months earlier and found a job in the kitchen of the Leonardo Club hotel.

Some of the hotel employees told Haaretz that the man, a New York City native, was about to be fired for some not better specified money-related issues.

Local press reported that the incident happened as the American got in a scuffle with a colleague for reasons yet unknown.

A hotel security guard then tried to break up the fight but the American snatched his gun and opened fire, killing his opponent. The victim was reportedly in his 50s'.

"A fight broke out between two hotel workers near the [hotel] entrance. One of the workers took the security guard's pistol, and even though people tried to break them up, the guy managed to pick up the pistol after it fell. Suddenly there were shots," another guest told Haaretz.

The hotel was almost fully booked as Israel is celebrating the biblical holiday of Sukkot.

Nine people, who suffered from shock after the incident, were taken to the Hospital.