ACRE, Israel - Police dispersed hundreds of Jewish protesters with water canons Friday in this northern Israel city, trying to ease tensions after two days of rioting that shook a mixed Jewish-Arab community.

Police Spokesman Micky Rosenfeld said some 300 residents attempted to enter an Arab neighborhood in Acre. Police forces stopped the crowd and arrested three suspects, he said.

Forces were already on high alert Friday after riots broke out between Arabs and Jews in Acre on the Jewish holy day of Yom Kippur. Police also increased security in Jerusalem for fear the violence could spill over.

"Our main aim is to have things go back to normal, both on the streets and in terms of the atmosphere," he said.

The riots in this working-class town brought to the fore the relations between Arabs and Jews inside Israel, ties which are typically peaceful but uneasy.

Over a quarter of Acre's 46,000 residents are Arabs, members of an ethnic minority that makes up about 20 percent of Israel's citizens. They have equality under the law, but have been discriminated against in public sector financing and jobs and are poorer overall than Israeli Jews.

In 2000, tensions erupted into riots that were put down by police, who killed 13 Arab rioters.

Israeli leaders sought to prevent a similar deterioration Friday.

Prime Minister-designate Tzipi Livni visited Acre, met with the city's mayor and urged residents to calm tensions and not take the law into their own hands.

President Shimon Peres called on Acre's residents to renew their coexistence.

"There is not a person in Israel who does not regret what happened in Acre," he said. "No one will profit from these riots, everyone will lose from these riots!"

The disturbances began Wednesday in a predominantly Jewish neighborhood after the start of Yom Kippur, the most solemn day of the Jewish calendar, when Jews generally do not drive and the streets remain empty.

When an Arab man drove into the neighborhood, Jewish youths began to beat him, police said. That incident escalated into street battles between Jews and Arabs and riots in which dozens of businesses and cars were damaged.

Police used tear gas and stun grenades to disperse the crowds. No one was seriously hurt, but the incidents ignited ethnic hatreds between neighbors who have shared the same town for decades.

Arab rioters reportedly chanted "God is Great," while Jews chanted "Death to Arabs."

On Friday, Jews and Arabs swept up broken glass and replaced punctured tires while wondering whether the brittle coexistence had been irreparably damaged.

"It's like a bomb, you know? You never know which day it's going to go off," said Gary Kogan, 32, standing outside the shattered window of his shop on a downtown street.

He said life would go back to normal in Acre but "we're going to hate each other." He then warmly shook hands with an Arab acquaintance who happened by, and the two men exchanged hopes that the town would quiet down.

The second man gave his name only as Kheir.

"It's stupidity, the way it started was stupidity," Kheir said. "Because of 20 people a whole city is suffering. Because of 20 people who can't stand Arabs," Kheir said.

Firas Roby, 34, another Arab resident, said hooligans on both sides set off the violence: "Racist people start with a small thing, and then the whole town is engulfed," he said.

The incidents drew fiery rhetoric from both Jews and Arabs.

Speaking to Israel Radio, hard-line Israeli parliamentarian Avigdor Lieberman compared the incidents to Kristallnacht, a 1938 Nazi assault against Jews in Germany.

Another far-right lawmaker, Arieh Eldad, also called the Acre riots said police "shouldn't be surprised when Jews take up arms to protect themselves."

Two Israeli Arab lawmakers, Ahmed Tibi and Mohammed Barakeh, were quoted in the Israeli daily Haaretz as calling the Acre incidents a Jewish "pogrom" against Arabs -- using a term historically used to denote mob violence against Jews.

Police said a total of 15 people were arrested, eight Arabs and seven Jews, including the three arrested Friday.

The Acre municipality announced Friday it was indefinitely postponing a theater festival that was to have started next week. The festival brings thousands of visitors, and its postponement was a major blow to the town's businesses.

Israeli lawmakers across the political spectrum criticized the decision, saying it sent a message of giving into the extremists.