Israeli Foreign Minister Avigdor Lieberman has proposed that the country's Arab citizens be offered financial incentives to move to a future Palestinian state.

Lieberman is an ultra-nationalist who lives in a settlement in the occupied West Bank and leader of a far-right party that sits in Prime Minister Benjamin Netanyahu's coalition.

Elections are not due in Israel until 2017 but Lieberman made his suggestion in a manifesto, entitled "Swimming Against the Stream", posted on his Facebook page.

"Those (Israeli Arabs) who decide that their identity is Palestinian will be able to forfeit their Israeli citizenship and move and become citizens of the future Palestinian state," he wrote in the manifesto.

"Israel should even encourage them to do so with a system of economic incentives," he said.

Lieberman has previously suggested that Israeli Arabs take an oath of loyalty to the state of Israel if they wish to remain in the country.

Last week, Israeli authorities arrested members of an alleged Hamas cell who are suspected of plotting an assassination attempt on Lieberman. They planned to attack the minister's car with an anti-tank missile as he drove to his Jewish settlement in the occupied West Bank.

Arab Israelis constitute approximately 20% of Israel's population of eight million.