JERUSALEM, May 14 (Reuters) - Israeli police arrested on Monday two Israelis who said they had murdered a Palestinian found dead in Tel Aviv, a police spokesman said.

Police spotted the men, aged 21 and 25 and also citizens of France, walking in the city with blood-stained hands, police spokesman Micky Rosenfeld said.

The men told the officers they had killed a man and led them to an apartment, where a body was found. Police then arrested them. The man was identified as a 35-year-old taxi driver and an Arab resident of East Jerusalem, Rosenfeld said.

Most Palestinians who live in Arab East Jerusalem are allowed to live and travel freely in Israel under laws enacted after Israel captured that part of the city and the West Bank 40 years ago. Palestinians want it as the capital of a future state

"The murder was carried out on a nationalistic level," Rosenfeld said. "Police are continuing the investigation."

Israeli media said the Palestinian had been stabbed in the neck. Rosenfeld said he could not elaborate on how the man was killed but said he suffered several wounds.

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