A house fire in the occupied West Bank suspected to have been set by Jewish extremists killed an 18-month-old Palestinian child, injured a four-year-old brother and both parents on Friday, Israeli security officials said.

Police spokeswoman Luba Samri said the "Price Tag" slogan used in the past by extremist Israelis was daubed on the walls of the family home that had been torched in a village near the West Bank city of Nablus.

"This is a suspected attack with nationalist motives," Samri said. It was the worst attack by Israeli extremists since a Palestinian teen was torched to death in a retribution slaying for three Israelis killed by abductors a year ago.

The house at Kafr Duma was destroyed by fire, apparently as the family slept inside, and Israeli security forces were at the scene.

A neighbouring house was also badly damaged but it had been empty and there were no casualties there. The three injured people from the first house were taken to Israeli hospitals, officials said.

The "Price Tag" group has been blamed for a string of mosque torchings in the West Bank in the past few years, often in retribution for Israeli actions against illegally built settlements.

Israel tore down two illegal structures in the Beit El settlement earlier this week.