Israeli Prime Minister Benjamin Netanyahu has ordered an investigation into the "abominable" revenge murder of a Palestinian teenager in East Jerusalem.

Mohammed Abu Khdair, 17, was forced into a car, according to eyewitnesses, before his partly-burned body was later discovered in a Jerusalem forest.

Netanyahu warned vigilantes "not to take the law into their own hands" as "Israel is a state of law, [and] everyone needs to conduct themselves according to law".

The attack comes after the discovery of the bodies of three Israeli teenagers -- 16-year-olds Naftali Fraenkel and Gilad Shaer and 19-year-old Eyal Yifrach -- kidnapped and killed in the occupied West Bank two weeks ago.

Israeli army radio described the murder of Khdair as a "suspected revenge attack" for the deaths of the three Israelis.

"In the early hours of Wednesday morning, police received a report of a person being forced into a car in Beit Hanina," police spokeswoman Luba Samri told AFP.

"Within an hour, a body was found in Jerusalem that has still not been identified. We are looking to see if there is a connection between the two incidents."

Khdair's family had filed a missing person's report after his disappearance and his father was taken by police to identify the body.

Angry Palestinian youths, near Khdair's home in Shuafat, hurled stones at police who retaliated with sound bombs.

Two Israeli photographers were reportedly shot by Israeli forces with rubber-coated bullets in the clashes with one seriously injured.

Before the teenager's death, groups of Israeli extremists marched through Jerusalem calling for revenge attacks against Arabs for the killing of the three Israeli teens with five Palestinians attacked.

Fifty people were arrested by Israeli police for their involvement in the incidents, according to Haaretz.