10 September 2011 Last updated at 12:06
The protesters broke into the embassy building, entering consular offices and throwing out documents, officials said.
Israel flew its ambassador and nearly all its diplomats back home.
Egypt's governing military council is meeting later on Saturday to discuss the situation.
The health ministry said that one of the three people who died had suffered a heart attack. More than 1,000 were injured.
Hundreds of protesters remained near the embassy until after dawn, burning tyres in the street and chanting slogans against Egypt's military rulers.
Riot police were on the streets and live gunshots were heard, says the BBC's Bethany Bell in Cairo, while the air was thick with tear gas.
There is a sharp increase in tension in what was already a very cold peace. Egypt is one of only two Arab countries to have a peace deal with Israel. Anti-Israel sentiment is certainly very deep-seated here, but this open expression is something quite new.
It's grown much more vocal since the fall of President Hosni Mubarak. These protests were sparked when Egyptian border guards were killed last month [on the border with Israel]. There have been people outside the embassy for a number of days.
I spoke to one of them and she said, "We've been brought up to hate Israel but now we can express this openly. Since the fall of Hosni Mubarak, no Egyptian blood will go unavenged."
The incident was a "gross violation" of standard diplomacy, he said.
Egypt is one of only two Arab countries - along with Jordan - to have made peace with Israel.
Anti-Israel sentiment has been on the rise in Egypt, fuelled by the deaths on 18 August of five Egyptian policemen on the Israeli border.
The Egyptian state news agency Mena said 448 people were injured in the clashes overnight into Saturday.
The unrest began after Friday prayers, when thousands converged on Cairo's Tahrir Square to demand faster political reforms following the ousting of former President Hosni Mubarak in February.
From there, hundreds marched on the Israeli embassy. They smashed through a security wall around the building before a group of about 30 broke in and threw documents out of windows.
An Israeli official told the BBC the intruders had entered consular offices, but not the main embassy.
After initially standing by, police moved against the protesters, firing tear gas. Several vehicles were set alight.
Live TV pictures in the early hours of Saturday showed protesters throwing petrol bombs at police vans which drove at a crowd of people to try to scatter them.
Shots were heard in the area but it is not clear who fired them. Protesters also attacked a police station nearby.
An Israeli official said 80 people - embassy staff, including the ambassador, and their families - were flown out overnight to Israel.
The Israeli consul remains in Cairo as acting ambassador.
UK Prime Minister David Cameron condemned the attack, and called on the Egyptian authorities to meet their obligations to protect diplomatic property and staff.
Peace treaty tested
There have been protests outside the embassy since the deaths on 18 August of five Egyptian policemen on the border with Israel.
Egyptian officials say they were killed as Israeli forces chased suspected militants across the border.
Gunmen had earlier that day attacked Israeli civilian buses near the Red Sea resort of Eilat, killing eight people.
Cairo called the policemen's death "unacceptable". Israel did not admit responsibility, but said the deaths were regretted.
Correspondents say the incident marked a sharp escalation in tensions between Israel and Egypt. Their 30-year-old peace treaty was already being tested after long-time Egyptian leader Hosni Mubarak was forced from office.
Under Mr Mubarak, ties between the two nations had been stable after a history of conflict.
But his removal has sparked fears among Israeli officials that a less amenable government could take charge in Cairo.
Egypt on alert after Israel embassy stormed in Cairo
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Egypt has declared a state of alert after protests on the streets of Cairo, following the storming of the Israeli embassy on Friday night.
Security forces fired tear gas and drove armoured vehicles at protesters throwing stones and petrol bombs. Three people died, officials said. The protesters broke into the embassy building, entering consular offices and throwing out documents, officials said.
Israel flew its ambassador and nearly all its diplomats back home.
Egypt's governing military council is meeting later on Saturday to discuss the situation.
The health ministry said that one of the three people who died had suffered a heart attack. More than 1,000 were injured.
Hundreds of protesters remained near the embassy until after dawn, burning tyres in the street and chanting slogans against Egypt's military rulers.
Riot police were on the streets and live gunshots were heard, says the BBC's Bethany Bell in Cairo, while the air was thick with tear gas.
There is a sharp increase in tension in what was already a very cold peace. Egypt is one of only two Arab countries to have a peace deal with Israel. Anti-Israel sentiment is certainly very deep-seated here, but this open expression is something quite new.
It's grown much more vocal since the fall of President Hosni Mubarak. These protests were sparked when Egyptian border guards were killed last month [on the border with Israel]. There have been people outside the embassy for a number of days.
I spoke to one of them and she said, "We've been brought up to hate Israel but now we can express this openly. Since the fall of Hosni Mubarak, no Egyptian blood will go unavenged."
Six members of the embassy staff were trapped inside the building during the riot and had to be rescued by Egyptian commandos, an Israeli official told the BBC.
He thanked Egypt for freeing the Israeli staff and described the unrest as a "serious blow to the fabric of peace" between the two countries. The incident was a "gross violation" of standard diplomacy, he said.
Egypt is one of only two Arab countries - along with Jordan - to have made peace with Israel.
Anti-Israel sentiment has been on the rise in Egypt, fuelled by the deaths on 18 August of five Egyptian policemen on the Israeli border.
The Egyptian state news agency Mena said 448 people were injured in the clashes overnight into Saturday.
The unrest began after Friday prayers, when thousands converged on Cairo's Tahrir Square to demand faster political reforms following the ousting of former President Hosni Mubarak in February.
From there, hundreds marched on the Israeli embassy. They smashed through a security wall around the building before a group of about 30 broke in and threw documents out of windows.
An Israeli official told the BBC the intruders had entered consular offices, but not the main embassy.
After initially standing by, police moved against the protesters, firing tear gas. Several vehicles were set alight.
Live TV pictures in the early hours of Saturday showed protesters throwing petrol bombs at police vans which drove at a crowd of people to try to scatter them.
Shots were heard in the area but it is not clear who fired them. Protesters also attacked a police station nearby.
An Israeli official said 80 people - embassy staff, including the ambassador, and their families - were flown out overnight to Israel.
The Israeli consul remains in Cairo as acting ambassador.
UK Prime Minister David Cameron condemned the attack, and called on the Egyptian authorities to meet their obligations to protect diplomatic property and staff.
Peace treaty tested
There have been protests outside the embassy since the deaths on 18 August of five Egyptian policemen on the border with Israel.
Egyptian officials say they were killed as Israeli forces chased suspected militants across the border.
Gunmen had earlier that day attacked Israeli civilian buses near the Red Sea resort of Eilat, killing eight people.
Cairo called the policemen's death "unacceptable". Israel did not admit responsibility, but said the deaths were regretted.
Correspondents say the incident marked a sharp escalation in tensions between Israel and Egypt. Their 30-year-old peace treaty was already being tested after long-time Egyptian leader Hosni Mubarak was forced from office.
Under Mr Mubarak, ties between the two nations had been stable after a history of conflict.
But his removal has sparked fears among Israeli officials that a less amenable government could take charge in Cairo.
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