Netanyahu spoke of plans to crack down on Palestinian protesters who hurl rocks and firebombs as he visited the site of a weekend car accident that killed a Jewish man.
Police have said the accident was caused by Palestinian stone-throwing, the latest in a number of such incidents in and around Jerusalem.
"This stone is one too many," Netanyahu's office quoted him as saying. "We are declaring war on those who throw stones and bottles, and rioters."
Netanyahu also held an emergency meeting Tuesday with security officials and discussed minimum sentences for those who throw stones or petrol bombs, as well as his intention to alter rules of engagement.
He said authorities planned to "massively increase fines for minors and their families" involved in such activity. He has not said how rules of engagement could be altered.
The statements, while mainly referring to street protests and rioting, followed three days of clashes between Palestinians and Israeli police at Jerusalem's flashpoint Al-Aqsa mosque compound over the Jewish new year.
Protesters threw stones and fireworks and security forces responded with stun grenades.
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