A senior Israeli politician has condemned attacks by extremist Jews on Palestinians as "terrorism".

On the weekend a group of Arab teenagers in Jerusalem were beaten by Jewish teenagers, with one of them left hospitalised, in a violent attack that was labelled a "hate crime" by vice premier Moshe Ya'alon.

The attack followed another on Friday near the Gush Etzion settlement, when a Palestinian taxi was attacked with a Molotov cocktail, injuring six people including two four-year-old children.

The last year has seen mounting concern about violent attacks by settlers on Palestinians, including "price tag" attacks on mosques and other sites in the West Bank.

The Israeli government has condemned the attacks but until now largely stopped short of labelling the perpetrators "terrorists".

Mr Ya'alon said the attacks were "totally unacceptable and outrageous"

Prime Minister Benjamin Netanyahu took the unusual step of phoning an aide to Palestinian president Mahmoud Abbas, to inform him that he had told security officials to take every step necessary to arrest those behind the attacks.

This year, for the first time "attacks by extremist Israeli settlers" have been included in a annual report on terrorism compiled by the US State Department.

In the section on the Middle East of Country Reports on Terrorism 2011 document, it said: "Palestinian militants killed Israelis in several attacks inside the West Bank. Militants also launched indiscriminate rocket and mortar attacks against Israel from the Hamas-controlled Gaza.

"Attacks by extremist Israeli settlers against Palestinian residents, property, and places of worship in the West Bank continued.