Police confirmed the deaths, with the three Arab Israeli attackers also shot dead by security forces after fleeing to an ultra-sensitive holy site in Jerusalem's Old City.
Police spokesman Micky Rosenfeld said the two officers died in hospital.
The incident was among the most serious in Jerusalem in recent years and threatened to raise Israeli-Palestinian tensions.
Arab Israelis are descendants of Palestinians who remained on their land following the creation of the state of Israel in 1948.
They largely identify with the Palestinian cause.
The three assailants were killed at the site known to Muslims as the Haram al-Sharif and to Jews as the Temple Mount, the location of regular clashes between Palestinians and Israeli police, but where gunfire rarely occurs.
The site includes the Al-Aqsa mosque and the Dome of the Rock.
The Al-Aqsa mosque was closed for Friday prayers after the attack by Israeli authorities in a highly unusual move.
Flashpoint site
The Haram al-Sharif/Temple Mount is considered the third-holiest site in Islam and the most sacred in Judaism.
It is central to the Israeli-Palestinian conflict, with Palestinians fearing Israel may one day seek to assert further control over it.
It is located in east Jerusalem, occupied by Israel in the 1967 Six Day War and later annexed in a move never recognised by the international community.
Jews are allowed to visit, but not pray there to avoid provoking tensions. Netanyahu said in his statement after the attack that the current rules would be maintained.
The site is administered by the Islamic Waqf organisation. Waqf officials said its guards at the site had been detained by Israeli police following the attack.
A wave of unrest that broke out in October 2015 has claimed the lives of at least 277 Palestinians, 42 Israelis, two Americans, two Jordanians, an Eritrean, a Sudanese and a Briton, according to an AFP toll.
Israeli authorities say most of the Palestinians killed were carrying out knife, gun or car-ramming attacks.
Others were shot dead in protests and clashes, while some were killed in Israeli air strikes on the Gaza Strip.
The violence has greatly subsided in recent months, though sporadic attacks have continued.
