The suspects were arrested in wildcat Jewish settlement outposts in the occupied West Bank as part of "the investigation into the events that occurred in Duma," the Palestinian village where the July 31 arson attack took place, police said in a statement.
It did not give the number of arrests.
Israel has pledged to crack down on Jewish extremists in the wake of the firebombing as well as a July 30 stabbing attack at a Jerusalem Gay Pride march that killed a 16-year- old girl and wounded five other people.
The attack also critically wounded the toddler's mother and four-year-old brother.
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