Netanyahu delivers racist speech at scene of recent shooting

"I am not willing to accept two states within Israel, a state of law for most of its citizens and a state within a state for some of its citizens," he said. "Whoever wants to be Israeli must be Israeli all the way."

Some Palestinians in Israel live in "enclaves with no law enforcement, with Islamist incitement and an abundance of illegal weapons that are often fired at happy events, weddings, and during endless criminal incidents," he added. 

Netanyahu blamed Islamic extremism amongst the Palestinians in Israel for the shooting and warned of stringent security measures against their areas to prevent any further violence.

"The brutality was incomprehensible," he said, "Wild incitement by Islamic extremists against Israel in the Arab sector, incitement in mosques, and incitement in the education system and incitement on social media. We are acting aggressively against that incitement."

The speech elicited a strong reaction from Israel's liberals and on social media.

"Everything else he said was a harsh, shameful, near-racist diatribe against Israel's Arabs," a commentator said in the Israeli daily Haaretz, adding that Netanyahu's speech was "cynical and shameless, even by the low standards to which he has accustomed us over the years."

Users on social media noted that conclusion of the Prime Minister's speech could be to ostracise nearly a quarter of Israel's citizenry.

Israeli police continue their manhunt for Palestinian Nashat Milhem, from the village of Arara in northern Israel on Saturday for allegedly killing two people and wounding several others when he opened fire at a bar in Tel Aviv.

Relatives of the suspected shooter described Milhem as a troubled man who was "traumatised" after a cousin was killed by Israeli police in 2006 and who had served time in an Israeli prison after allegedly grabbing an officer's gun.

Milhem's father, Mohammed, apologised for what happened and wished the victims a speedy recovery.

"I did not educate him this way," he said.

The suspect's relatives have called upon him to turn himself in. However, over 24 hours after the attack the shooter was still at large.

Palestinians living in Israel make up a fifth of the country's 8.4 million people and have long complained of unfair treatment in areas such as housing and employment opportunities.

Many identify more with their Palestinian brethren in the West Bank and Gaza and with Palestinian nationalism rather than with Israel.

The attack comes amid months of Palestinian attacks that have killed 21 Israelis, mostly in stabbings, shootings and car-ramming attacks.

During that time, at least 131 Palestinians have been killed by Israeli fire or in clashes with security forces.

Israel says the violence is being fanned by a Palestinian campaign of incitement. The Palestinians say it is rooted in frustrations stemming from nearly five decades of Israeli occupation.