At least nine people were believed still kidnapped in the Gaza Strip after the standoff at the Jericho prison ended with the arrests of Palestinian militants wanted for the 2001 assassination of an Israeli minister.
Israeli troops raided the prison on Tuesday and began arresting prisoners.
The operation was targeting militant leader Ahmed Saadat of the Popular Front for the Liberation of Palestine (PFLP) who, along with five other militants, was jailed under British-US supervision for the 2001 murder of Israeli tourism minister Rehavam Zeevi.
Israeli troops had pounded the compound with tank and missile fire through the day in a bid to force the militants' surrender. Two Palestinian security guards were killed and 26 wounded.
After taking refuge in a cell block, Saadat and the other militants eventually surrendered and were taken away by Israeli forces.
The head of Israeli central command, General Yair Naveh, hailed the operation a success.
"The six Palestinians involved in this murder as well as 15 other wanted militants were arrested and we are going to identify them," Mr Naveh told reporters. "We have also detained 280 Palestinian police officers."
Israeli Public Security Minister Gideon Ezra said the prison raid was undertaken to prevent the militants going free after Palestinian President Mahmoud Abbas recently voiced readiness to release them.
The prison assault drew a furious response from Hamas's prime minister designate Ismail Haniya who slammed the "dangerous escalation" and warned Israel against any attempt on the life of Saadat and his comrades.
Palestinian chief negotiator Saeb Erakat condemned what he described as a "kidnapping operation" and held Britain and the US responsible for the safety of the PFLP leader.
The PFLP vowed that the seizure of its jailed leader and other militants would "not pass without retaliation."
Minutes before the raid British monitors were withdrawn from the prison, prompting furious charges of collusion from the Palestinians.
Later a spokeswoman for the British consulate in east Jerusalem denied those charges, insisting the decision had been taken solely for the monitors' safety and had been communicated to Israel and the Palestinians on March 8.
The explanation, however, failed to prevent angry protests against British and US interests across the Palestinian territories.
Militant groups warned all British and US nationals to quit the West Bank and Gaza Strip "immediately".
"We call on all British and US nationals to leave the Palestinian territories immediately on pain of unprecedented consequences," the Al-Aqsa Martyrs' Brigades warned in Gaza City.
Riots and abductions
At least seven foreigners were abducted in the Gaza Strip and British and US offices were attacked and ransacked across the territories.
Hundreds of furious Palestinians mobbed the British cultural centre in Gaza City and set fire to the building after an angry protest in which gunmen shot bullets into the air.
Protestors also swarmed into the British consulate in Gaza City, while other furious Palestinians attacked the British Council office and a branch of the HSBC bank in the West Bank town of Ramallah.
The British Council said its centre in Gaza City was "very badly damaged" after a mob gutted its ground and second floors by fire.
Palestinian gunmen also barged into an American office used to teach English in Gaza City and smashed up furniture and warned US nationals against visiting Gaza, witnesses said.
Two Australian teachers working in Gaza were taken hostage for two hours before being surrendered to security forces.
Two female French doctors and a Swiss who headed the Red Cross mission in Khan Yunis were snatched, while four other foreigners were grabbed at gunpoint from a luxury hotel.
A French reporter and a French photographer were also kidnapped, the foreign ministry in Paris said.
The South Korean foreign ministry confirmed one of its nationals, a journalist, was taken in Gaza.
PFLP militants also snatched a US citizen for minutes in the northern Gaza town of Beit Hanun before Palestinian security forces recovered the man.
A US teacher at the Arab American University in the northern West Bank town of Jenin, Douglas Johnson, 45, was also briefly held by militants.
With the unrest threatening to escalate out of control, Palestinian police in the Gaza Strip, acting on new live fire orders, shot dead a PFLP militant and wounded seven others.
Calls for calm
Palestinian Authority president Mahmoud Abbas, on a tour of key European capitals, appealed for calm and urged Palestinians to refrain from attacking foreign interests in the Palestinian territories.
"President Abbas calls on all Palestinian people not to turn the protest against the Israeli attack on the Jericho prison into violent action against cultural centres of the European Union or any other country," a statement said.
But the PFLP vowed that the siege and the capture of Ahmed Saadat would not go unpunished, sparking fears of heightened Middle East violence.