Palestinians from President Mahmoud Abbas's Fatah faction named a town square on Sunday after the leader of a 1978 bus hijacking in which 35 Israelis were killed.

The ceremony, in Al-Bireh, a town near the Palestinian city of Ramallah, was held while Israelis mourned five members of a Jewish settler family knifed to death on Saturday in a West Bank settlement in an attack Israel blamed on Palestinians.

Many Palestinians see Dalal al-Mughrabi, a member of the then-underground Fatah movement, as a heroine for her role in hijacking the bus on Israel's Haifa-Tel Aviv highway.

Israelis consider Mughrabi, who was killed in the incident, a terrorist.

"We stand here in praise of our martyrs and in loyalty to all of the martyrs of the national movement," Fatah member Sabri Seidam said at the unveiling of a plaque showing Mughrabi cradling a rifle against a backdrop map of Israel, the West Bank and Gaza Strip. The square was festooned with Palestinian flags.

Around a dozen people -- none of them Palestinian government officials -- attended the ceremony.

Ron Dermer, an adviser to Israeli Prime Minister Benjamin Netanyahu, said the Palestinian Authority had "allowed a public square to be named after a mass murderer who perpetrated one of the worst terror attacks in Israel's history". He said the Palestinian leadership must be held accountable by the international community "for its failure to stop the glorification of murderers and for its continued incitement towards hatred and violence against Jews and Israel".

Mughrabi and a group of gunmen landed by sea on a beach in northern Israel. They shot dead an American woman taking photos of wildlife and then hijacked the civilian bus and shot at cars.

The vehicle was brought to a halt at a police roadblock near Tel Aviv, where a gunfight ensued and explosives detonated. Thirty-five Israelis and 10 of the 12 hijackers were killed.

The square's inauguration had originally been scheduled to take place a year ago, coinciding with a visit by U.S. Vice President Joe Biden. Palestinian President Mahmoud Abbas's Palestinian Authority cancelled that ceremony.