The resolution, passed yesterday at the UN organisation's Paris headquarters 22 votes to 10, with 23 abstentions, denounced actions taken by "Israel, the occupying power... To alter the character and status of the holy city of Jerusalem."
It particularly criticised Israel's annexation of east Jerusalem after occupying it in 1967, a move never recognised by the international community.
"UNESCO again accepted an absurd resolution yesterday about the status of Jerusalem - the capital of the Jewish people for 3,000 years," Netanyahu said at the opening of a cabinet meeting.
Today's cut was the third time in recent months Israel reduced its UN budget over what it perceived as anti-Israel votes, putting the 2017 payments at USD 3.7 instead of the original USD 11 million, an Israeli official said.
Netanyahu, however, noted the "silver lining" of Tuesday's vote, which he said saw more states supporting Israel's position than in previous similar resolutions.
"This is a consistent trend," he said, thanking the countries that voted against the resolution, first and foremost "Italy, the first European state that announced its opposition to it."
Also today, the Israeli foreign ministry summoned Swedish ambassador Carl Magnus Nesser and reprimanded him over Stockholm's support of the UNESCO resolution.
Senior ministry officials expressed their "bitter disappointment" over the vote in their talk with Nesser, noting Sweden's "systematic voting" pattern against Israel, a statement read.
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