Israel Palestine Graffiti
A resident walks past graffiti in the predominantly Arab neighbourhood of Sheikh Jarrah in East Jerusalem where the words "Price Tag" were sprayed on a nearby wall.Reuters

Israeli police have rejected a United States terror report's inclusion of Jewish extremist attacks on Palestinians - such as the vandalism of West Bank mosques - as terrorism.

The US State Department's 2013 Country Reports on Terrorism spoke of an increase of racist anti-Palestinian vandalism - otherwise known as "price tag" attacks - against symbolic buildings such as mosques and churches.

"Attacks by extremist Israeli settlers against Palestinian residents, property, and places of worship in the West Bank continued and were largely unprosecuted," said the report.

Israeli police refuted the report's claims and argued that nationalist "price tag" attacks were far from terrorism.

"There's no comparison whatsoever between criminal incidents with nationalistic motives and terrorist-related incidents," said Israel police spokesman Micky Rosenfeld.

Price tag attacks have begun to spread from the occupied West Bank and into Israel. The latest example is the desecration of the tombstone of Izz ad-Din al-Qassam, the Muslim preacher who inspired Hamas' military wing - in the Israeli town of Haifa by suspected far-right Israeli militants.

The attacks are intended to intimidate Arab populations living within Israel and the term "price tag" refers to retribution Jewish settlers say they will seek for the Israeli government's attempts to prevent settlement-building in the West Bank.

"The UN Office of the Coordinator for Humanitarian Affairs reported 399 attacks by extremist Israeli settlers that resulted in Palestinian injuries or property damage," the report continued.

"Violent extremists, including Israeli settlers, vandalised five mosques and three churches in Jerusalem and the West Bank."

The report defined price tag attacks as "property crimes and violent acts by extremist Jewish individuals and groups in retaliation for activity they deemed to be anti-settlement".

"There are a number of ongoing investigations," said Rosenfeld about the attacks.

"It is vandalism with nationalistic motives but these are not nationalistic attacks on Palestinians," he continued.

"You cannot compare whatsoever between terrorist acts, the cold-blooded killing of Israelis, and... vandalism on that level."

As the attacks continue to escalate, approximately 1,500 people took part in a protest march through the Israeli Arab town of Fureidis, near Zichron Ya'acov, calling for an end to the attacks and for police to find the perpetrators.