The suspects were rounded up in a series of raids across central and southern Israel and the occupied West Bank, police spokeswoman Luba Samri said.
All eight belong to Lehava, an extremist rightwing group that fights against fraternisation between Jews and non-Jews which could lead to intermarriage. The group has been linked to an arson attack on a Jewish-Arab school last month.
"Eight suspects who belong to Lehava were arrested and detained for questioning on suspicion of offences involving incitement to carry out acts of violence and terror for racist motives," Samri said in a statement.
The raids took place in Herzliya and Rishon LeZion near Tel Aviv, in the southern town of Netivot, in Jerusalem, and in the Beitar Ilit settlement in the West Bank.
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In a separate development, five Jewish youths -- four of them minors -- were picked up in a park in Jerusalem overnight carrying two commando knives and a screwdriver as they were collecting stones to attack Arabs, police said.
Last Tuesday, police arrested 10 Lehava members in raids across Israel and the West Bank. Among them was the group's leader Bentzi Gopstein who lives in a settlement inside the southern city of Hebron.
Gopstein and two others were released to house arrest on Friday, Samri told AFP, indicating that they were likely to be indicted "in the coming days." The other seven were place on conditional release, she said.
On December 7, police arrested three Lehava activists on charges of setting fire to a first-grade classroom at Jerusalem's Hand-in-Hand school on November 29. Daubed on the walls in Hebrew were slogans reading "Death to Arabs" and "There's no coexistence with cancer."
Lehava activists follow the teachings of the late Meir Kahane, a virulently anti-Arab rabbi whose Kach party and another offshoot were banned in 1994 after one of its members gunned down 29 Muslims in a flashpoint mosque in the West Bank city of Hebron.