Two guests have been stabbed in a terror attack carried out by an employee screaming 'Allahu akbar' at a hotel in Israel.

A 60-year-old Israeli was severely wounded during the horrifying attack in the dining room of the building in Kibbutz Tzuba, in the Jerusalem Hills, on Friday.

A second man, 23, was also wounded. Emergency services rushed to the scene and the two victims were evacuated to Hadassah Ein Kerem Hospital.

The terrorist is a 42-year-old resident of Shuafat refugee camp who has a criminal past, according to local media. He had previously been convicted of stone-throwing offenses.

The attacker was an outside contractor hired to wash dishes at the hotel.