Israeli Prime Minister Benjamin Netanyahu has said there are "signs" that a Palestinian man who rammed a truck into a crowd of Israeli soldiers, killing four of them, was an ISIL supporter.

Sunday's attack was carried out by 28-year-old Fadi el-Kunbar, a Palestinian from Israeli-occupied East Jerusalem, who drove the truck into the group of soldiers as they stood on the side of a road. Seventeen soldiers were wounded and el-Kunbar was shot dead.

"We know the identity of the terrorist. All signs are indicating he is a supporter of the Islamic State [of Iraq and the Levant group]," Netanyahu said, giving no further details.

Family members of el-Kunbar have reportedly been arrested and held for questioning.

Recent attacks committed by Palestinians primarily against Israeli soldiers have been said by some Palestinians to be a "natural" response to Israel's occupation of East Jerusalem and the West Bank, its blockade of the Gaza Strip, and its discriminatory laws against Palestinian citizens of Israel.

Since October 2015, 247 Palestinians, 40 Israelis, two Americans, a Jordanian, an Eritrean and a Sudanese have been killed in a wave of violence, according to an AFP news agency count.

Israeli authorities have also embarked on a wave of mass arrests and home demolitions, which human rights groups have described as a "shoot-to-kill" policy and "collective punishment" against the families of Palestinians who attack Israeli soldiers.