The incident occurred in a train carriage on the light rail network near the walled Old City.
The woman was treated for stab wounds and later died in hospital, police said.
The assailant was named as Jamil Tamimi (57) from the east Jerusalem Palestinian neighbourhood of Ras el-Amud.
The Academic institution emitted an official statement to mourn her affiliate stipulating: "Deep sorrow over the murder of a British student, Hannah Bladon, in today's attack". As the train approached Kikar Tzahal, he reportedly stood up from his seat, pulled out a knife and stabbed a fellow passenger. The British Embassy in Israel said it was "in touch with local authorities" following the stabbing, but could not officially comment beyond that.
Bladon, a student of Birmingham University in England, commenced her studies at the Hebrew University of Jerusalem in January 2017 in a student exchange program.
Police there have detained a 57-year-old man, calling him an "Arab terrorist".
The Director of the University's Rothberg School Office and Student Life said to Israeli TV's Channel 10 News, that Bladon was "very polite", appearing shy, "but she wasn't like that", he said.
A pregnant 30-year-old woman and a 50-year-old man were also injured in the attack, which took place on a tram near Jerusalem City Hall, but were not injured. The attacker was apprehended by officers at the scene, police said.
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She had been taken to the hospital in critical condition after suffering multiple stab wounds aboard the city's light rail, Israel Radio reported.
The victim was approximately 25 years old.
According to the ISA, Tamimi was convicted of sexually abusing his daughter in 2011 and attempted to commit suicide earlier this year by swallowing a razor blade. "Terror can never overcome us".
Thousands of people filled parts of the ancient city: Jews to celebrate Passover, which ends Sunday, and Christian pilgrims for Good Friday.
It was the suicide bombing campaign starting in 2001 during the Second Intifada, masterminded by the likes of fugitive from US justice Ahlam Tamimi, that led to the building of the security barrier (in some places a wall, in most places a fence).
Palestinian fears that Israel will seek to change those rules have been the source of repeated violence.
Israel says at least 162 of the Palestinians killed had carried out stabbing, shooting or vehicle ramming attacks.
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