Violence by Jewish settlers has been cited for the first time in a US state department list of "terrorist incidents", as Israeli political leaders condemned a string of recent attacks on Palestinians in the West Bank and Jerusalem.

The inclusion of assaults on Palestinian targets in the annual report on terrorism reflects growing concern in Israel and internationally that violence by a minority of Jewish extremists could trigger a new cycle of conflict and further damage the prospects of a peace agreement between the two sides.

"Attacks by extremist Israeli settlers against Palestinian residents, property and places of worship in the West Bank continued," said the Country Reports on Terrorism 2011. It referred to "price tag" operations, meaning violence committed by radical settlers against Palestinians in retribution for actions by the Israeli government or army deemed to be "anti-settler".

US and European officials have become more vocal in criticising settler violence amid fears that the actions of a minority of Jewish extremists could provoke a militant response from Palestinians. According to the UN, violent attacks by settlers on Palestinians and their property, mosques and farmland has increased by almost 150% since 2009.

On Friday, the US state department condemned "in the strongest possible terms" the firebombing of a Palestinian taxi near Bethlehem, in which six people – including four-year-old twins – were injured. It urged expeditious action by Israel to bring the perpetrators to justice and for "all parties to avoid any actions that could lead to an escalation of violence".

The attack was widely blamed on settlers, with military sources suggesting "Israeli civilians were responsible". A second firebomb was found near the scene. No arrests had been made by Sunday afternoon.

Israeli politicians were also swift in their condemnation. The prime minister, Binyamin Netanyahu, said it was a "very serious incident", and on Sunday, Moshe Ya'alon, minister for strategic affairs, described it as "a terrorist attack".

He linked the firebombing to a separate incident in Jerusalem at the weekend, in which a Palestinian youth was severely beaten by dozens of Jewish teenagers, who witnesses said were searching for Arabs to attack.

"The hate crimes committed over the weekend against Arabs in Judea and Samaria [the biblical terms for the West Bank] and Jerusalem are intolerable, outrageous and must be firmly dealt with," Ya'alon said. "These are terrorist attacks. They run contrary to Jewish morality and values, and constitute first and foremost an educational and moral failure."

Jamal Julani, 17, from East Jerusalem, was admitted to hospital in a critical condition and placed on a respirator in the intensive care unit. A 19-year-old Jewish man was arrested, and further arrests were expected. A police spokesman described the incident as a brawl, and said it had no connection to settlers.

The Country Reports on Terrorism cited several incidents of settler violence during 2011, including attacks on Israeli military personnel and a base. Over the year 10 mosques in the West Bank and one in an Israeli-Arab town were attacked, it said.

Human rights groups which monitor settler violence say it routinely includes assaults against individuals and groups of Palestinians, harassment, uprooting trees, burning fields, attacks on livestock and damage to cars and houses. It usually peaks during the autumn olive harvesting season.

According to the UN office for humanitarian affairs, the number of settler attacks causing casualties or damage to Palestinian property has increased by 144% between 2009 and 2011(pdf). Three Palestinians were killed and 183 injured by settlers last year; about 10,000 trees were damaged or destroyed; and more than 90% of complaints filed with Israeli police were closed without charges being brought.

"One of the key factors in the growth of settler violence is the lack of effective law enforcement," said Sarit Michaeli of human rights group B'Tselem. "The Israelis have been calling settler violence 'terrorism' for a while now, but that in itself is not a guarantee that they will fulfil their obligations to protect Palestinians."

According to B'Tselem, Israeli security forces often fail to intervene to stop settler violence when alerted to it or already present at the scene. In May, a video posted by B'Tselem on Youtube showed settlers shooting at a group of Palestinian protesters while soldiers and police officers stood by.

A recent article published by Foreign Affairs last week, The Rise of Settler Terrorism, attributed the increase in attacks to "the growth of a small but significant fringe of young extremists, known as the 'hilltop youth', who show little, if any, deference to the Israeli government or even to the settler leadership … These settlers – likely no more than a couple of thousand, a small but dangerous minority within the broader community – are the ones leading the 'price tag' attacks against Palestinian civilians and Israeli soldiers."

The US state department report also said that in 2011: "Israel faced terrorist threats from Hamas, the Popular Resistance Committees, and Palestinian Islamic Jihad, particularly from Gaza but also from the West Bank, and from Hezbollah in Lebanon."

Among the terrorist incidents it listed for 2011 were the murder of five members of the Fogel family at their home in a West Bank settlement, the death of a British national and the injury of 50 other people in a bomb explosion at Jerusalem's central bus station, and the killing of a resident of the Israeli city of Ashkelon by a rocket fired from Gaza.