Netanyahu had said on July 27 that he wanted Al-Jazeera expelled amid tensions over a sensitive Jerusalem holy site.
"Al-Jazeera has become the main tool of Daesh (the Islamic State group), Hamas, Hezbollah and Iran," Communications Minister Ayoob Kara, a member of the Druze community from Netanyahu's Likud party, told a press conference.
He accused the Qatar-based broadcaster of "inciting violence which has provoked losses among the best of our sons", referring to two Druze policemen who were killed in a July 14 attack near the Al-Aqsa compound in east Jerusalem.
The communications ministry said that "nearly all countries in the region including Saudi Arabia, Egypt and Jordan, have concluded that Al-Jazeera incites terrorism and religious extremism."
It had become "ridiculous that the channel continued to broadcast from Israel".
The ministry said it would also demand the revocation of the credentials of journalists working for the channel and cut its cable and satellite connections.
The closure of Al-Jazeera's offices would come under the remit of security officials.
Israeli authorities would also seek to limit access by the Jewish state's Arab citizens to the station's broadcasts in Arabic, the communications ministry statement said without elaborating.
Regional kingpin Saudi Arabia, Bahrain, the United Arab Emirates and Egypt broke ties with Qatar on June 5, accusing it of fostering extremism and later issuing 13 demands, including Al-Jazeera's closure.
"The Al-Jazeera channel continues to incite violence around the Temple Mount," Netanyahu wrote in a Facebook post, referring to the Haram al-Sharif compound in Jerusalem, known to Jews as the Temple Mount.
Protests erupted at the contentious site after Israel last month installed new security measures including metal detectors, following the shooting dead of the two Israeli policemen by attackers who emerged from the compound.
"If this is not possible because of legal interpretation, I am going to seek to have the necessary legislation adopted to expel Al-Jazeera from Israel."
Israel has regularly accused the broadcaster of bias in its coverage of the Israeli-Palestinian conflict.
Netanyahu heads what is seen as the most right-wing government in Israeli history.
He has frequently criticised the news media, accusing outlets of seeking to undermine his government.
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