Palestinian president Mahmud Abbas, under pressure over recent comments that some have labelled incitement, quickly condemned the fire at Joseph's Tomb, in the northern city of Nablus.
Video showed what looked like an extensive blaze, and the Israeli army called it "a despicable act" of desecration.
UN Secretary-General Ban Ki-moon strongly condemned the arson attack at the opening of an emergency session of the Security Council called to discuss the escalating violence.
Israeli fire killed two Palestinians and wounded 98 others in clashes along the border in the Gaza Strip.
Another Palestinian died in clashes in Beit Furik near Nablus, while protests also broke out in Bethlehem and Hebron.
Outside the West Bank settlement of Kiryat Arba, a Palestinian disguised as a news photographer stabbed and wounded a soldier before being shot dead.
Israeli security forces have deployed massively in Jerusalem after two weeks of Palestinian attacks in the city and across Israel.
On Thursday, Israeli Prime Minister Benjamin Netanyahu reiterated his willingness to meet Abbas, while accusing him of inciting and encouraging violence.
"It's time that president Abbas stops not only justifying it, but also calling for it," Netanyahu told reporters.
US Secretary of State John Kerry, who plans to travel to the region "in the coming days", also warned the Palestinian leader against incitement.
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