They said worshippers in the northern West Bank village of Aqraba arriving for morning prayers found broken windows and extensive fire damage to the ground floor women's prayer section.
An AFP photographer said the words "price tag" were painted nearby in Hebrew, along with references to the late Meir Kahane, founder of the virulently anti-Arab Kach movement, and to the nearby settlement of Bracha.
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Israeli police said they had been notified of the attack.
The term "price tag" is a euphemism for nationalist-motivated hate crimes by Jewish extremists aimed at Palestinian and Arab property, but which have also targeted non-Jews and occasionally leftwing Israelis and the security forces.