Israel blamed Syria, which has allowed Islamic Jihad leaders to operate from Damascus for many years.
Syria denied the charges.
Syria "had nothing to do with the Tel Aviv operation and that this (Islamic Jihad) movement's office is closed in Syria," a foreign ministry official in Damascus told reporters on condition of anonymity.
Meanwhile, Israeli and Palestinian security forces each made arrests in the West Bank, and Israel said it was freezing plans to hand over security control to the Palestinians in several West Bank towns.
Armed Palestinian factions have traditionally claimed responsibility immediately after suicide bombings. But Islamic Jihad leaders repeatedly denied involvement until last evening, when the group released a video and posted a message on its Web site saying it was behind the bombing at a Tel Aviv night club that killed four Israelis and wounded about 50. It was the first such bombing inside Israel in nearly four months.
An Islamic Jihad official, identified only as Abu Tarek, said on the Web site that a one-month pause in attacks was over and would not be extended because Israel had continued to kill and arrest Palestinians.
"As long as the other side is not committed, there will be a response from our side," he said.
Also, a video left by the bomber, Abdullah Badran, 21, showed him next to Islamic Jihad flags and vowing to avenge the deaths of Palestinians. In a statement, he sharply criticized the Palestinian Authority, accusing it of collaborating with the United States and Israel.
Overall violence has sharply fallen in the past month, and an informal truce announced Feb. 8 by Israeli Prime Minister Ariel Sharon and Palestinian leader Mahmoud Abbas has mostly been holding. Some Palestinians had been killed and arrested, but Israel said these actions were in response to planned or actual attacks.
Islamic Jihad's bombing and what appears to be its intention to carry out more attacks places Abbas in an extremely difficult position.
Israel is demanding that Abbas confront the armed factions, arrest their members and seize their weapons. Abbas has sought to coax the factions into halting attacks.
Commenting before Islamic Jihad claimed responsibility, Abbas said the bombing was the work of a "third party" and an attempt "to sabotage the peace and calm that was agreed on by all the factions."
Abbas, speaking at the Palestinian political headquarters in the West Bank city of Ramallah, added: "We will not hesitate for one moment to follow them and to bring them to justice. We will not allow anybody, whoever he is, to sabotage our aims."
The Israeli security forces arrested five suspects, and the Palestinian security forces picked up three more near the West Bank town of Tulkarem.
Israeli officials said the military was not planning a major response. Officials on both sides were treating the bombing as an extremely serious matter, but said they were abiding by their commitments to end violence.
The arrests by the Palestinian security forces and Abbas' explicit criticism of the bombers contrasted with the responses by his predecessor, Yasser Arafat, to such attacks. Under Arafat, who died in November, the Palestinian leadership issued brief statements denouncing bombings.
By Greg Myre February 27, 2005.