Shocking footage has emerged appearing to show guests at a Jewish wedding celebrating the death of a Palestinian toddler who was burned alive after an arson attack on his home.

The video, which is believed to have been recorded a week ago, was aired on Israeli TV last night and showed young wedding guests dancing with guns and knives during the party in Jerusalem.

One guest even appears to be dancing with a knife through a picture of 18-month-old Ali Dawabsheh while another has what looks like a petrol bomb.

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Shocking footage has emerged of guests at a Jewish wedding in Jerusalem appearing to celebrate the death of Palestinian toddler Ali Dawabesh

The guests were seen waving knifes, guns and even a petrol bomb while dancing at the party

Toddler Ali and his parents died when their home in the village of Duma in the occupied West Bank was set ablaze in July in an incident Israeli officials described as 'Jewish terrorism'.

Israeli police said they were investigating whether the actions at the wedding constitute an incitement to violence.

There have also been hints that charges may be imminent in the arson case but some of the suspects' lawyers have accused Shin Bet state security investigators of trying to exact confessions with torture.

But Israeli Prime Minister Benjamin Netanyahu has defended the Shin Bet's methods as lawful and said the wedding video was proof of the need to spare no effort in curbing violent Jewish zealots.

He said: 'The shocking pictures that were broadcast ... show the true face of a group that constitutes a danger to Israeli society and to the security of Israel.

'We are not prepared to accept people who deny the laws of the state and do not view themselves as subject to them.

One wedding guest appeared to be holding up a knife that had been stabbed through a picture of 18-month-old Ali

'The pictures underscore how important a strong Israel Security Agency (Shin Bet) is to the security of us all.'

Netanyahu's condemnation was echoed within his coalition government, though one allied far-right lawmaker demurred.

Bezalel Smotrich, whose Jewish Home party is a powerful partner of Netanyahu's conservative Likud, voiced suspicion about the leak of the wedding video, which Channel 10 said had originally been seized by state investigators.

He told Israel's Army Radio: 'My concern is that someone in the security establishment released this clip, at this time, in order to try to grant legitimacy to those aberrant interrogation methods, which apparently include unacceptable use of violence, against people from this group.'

Toddler Ali, pictured, and his parents died when their home in the village of Duma in the occupied West Bank was set ablaze in July in an incident Israeli officials described as 'Jewish terrorism'

A mourner carries Ali's body to his funeral. There have been hints that charges may be imminent against suspects in the arson case

The footage comes at a time of the worst outbreak of Palestinian street violence in recent years.

On Thurdsay, a Palestinian stabbed and wounded two security guards near the Jewish settlement of Ariel in the West Bank before being shot dead.

Meanwhile in the city of Hebron, a Palestinian was killed by Israeli security forces after he tried to stab them with a screwdriver.

Almost daily stabbings, shootings and car-rammings by Palestinians have killed 20 Israelis and a U.S. citizen since October.