JERUSALEM, Oct 12 (Reuters) - Israeli Prime Minister Ehud Olmert told police on Sunday to show "zero tolerance" towards rioters after a fourth night of violence between Arabs and Jews in a northern Israeli city.

Trouble began in Acre, a city Olmert said had been "a shining example of co-existence", on Wednesday after an Arab drove into a Jewish neighbourhood on Yom Kippur, the Jewish Day of Atonement when traffic in Israel largely comes to a halt.

"The scenes from Acre since Yom Kippur and over the past several nights have been very distressing," Olmert told the weekly cabinet meeting, saying the city's 53,000 residents were being "held hostage by a small group of extremists".

"The police have been instructed to show zero tolerance towards violence," he said.

Israeli police sent reinforcements to Acre to try to end stone-throwing clashes that continued on Saturday night. Some 25 Arabs and 25 Jews in the city, a former Crusader capital of the holy land, have been arrested since Wednesday.

The violence has brought to the surface underlying tensions between Jews and Israel's Arab citizens, who sympathise with Palestinians in Israeli-occupied territory and have long complained of discrimination.

At least 11 Arab homes have been torched since the rioting began, local officials said. About 28 percent of Acre's residents are Arabs, according to the city's Web site.

Arabs make up about 20 percent of the population of the Jewish state. Israeli officials say Arabs enjoy full citizenship rights and have strong representation in parliament.

In the Gaza Strip, Hamas leader Ismail Haniyeh said Jewish attacks on Arab homes in Acre were part of "a systematic policy to force the Palestinians to quit their lands".

An Israeli Arab Islamic leader has pledged his movement would fund repairs for the torched Arab dwellings. (Writing by Jeffrey Heller, Editing by Richard Balmforth)

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