Suspected Jewish extremists punctured the tyres of 28 cars and scrawled graffiti in an Arab Israeli town before dawn on Tuesday in the latest in a spate of apparent hate crimes, an AFP correspondent reported.
On a wall near the vandalised cars in Abu Ghosh, west of Jerusalem, the perpetrators wrote in Hebrew: "Arabs out," and: "Racism or assimilation."
Police were investigating the crime, spokesman Micky Rosenfeld said, adding that there were "strong indications" that it was "nationalistically motivated".
Abu Ghosh has a reputation for good relations with Israel's Jewish majority and attracts hordes of Israelis to its restaurants.
The use of the word assimilation is a negative reference to Jews and non-Jews mixing.
Jewish extremists have carried out a spate of hate crimes, mostly targeting Arabs, to exact what they describe as a "price tag" for measures they regard as harming the community.
Initially carried out against Palestinians in retaliation for state moves to dismantle unauthorised settler outposts in the occupied territories, "price tag" attacks have become a much broader phenomenon with racist and xenophobic traits.
They tend to involve the vandalism or destruction of property and have included arson attacks on cars, mosques and olive trees, but have also targeted Christian holy sites and even Israeli army bases.
Prime Minister Benjamin Netanyahu condemned the Abu Ghosh attack, which he said "was against Judaism, against our people's values and those of our state."
Netanyahu recalled that the security cabinet had moved on Sunday to expand the legal and investigative powers of security forces to tackle "price tag" attacks.
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The cabinet decided to define suspects as members of "unlawful organisations", but stopped short of agreeing to justice ministry proposals to call their acts "terrorism".
President Shimon Peres telephoned Abu Ghosh mayor Salim Jaber to condemn the attack, which he said "crossed a red line."
"We utterly condemn any expression of racism and vandalism. The residents of Abu Ghosh are dear to my heart and to the state of Israel. They are symbols of coexistence," Peres told Jaber in a statement relayed by the presidential office.
Police chief Yohanan Danino underlined the priority given to investigating such offences. He said a new police unit had been set up dedicated solely to "price tag" crimes.
"People don't understand that it's not the graffiti or its content. The act can incite not only Israel but much beyond," he said at a parliamentary hearing on Tuesday. "You'll be seeing arrests very soon."
Earlier in the day, Economy Minister Naftali Bennett, who heads the hardline nationalist Jewish Home party, called such attacks "immoral and un-Jewish".
"There is a small group of evil-mongers who want to create a chain of hatred and violence between Arabs and Jews in our country," he wrote on Facebook. "We won't let them succeed."
Last week, two vehicles were burnt in a neighborhood of annexed Arab east Jerusalem, with the words "price tag" daubed nearby.
In a separate attack, graves were desecrated in an Arab Christian cemetery in Jaffa.
And two weeks ago, anti-Christian graffiti was daubed on the Church of the Dormition, a leading Jerusalem pilgrimage site.