An online video portraying the Israeli left as a Nazi collaborator paid to fabricate anti-Israel news by a German-speaking master has caused controversy ahead of elections in the country.

The animated clip titled "The Eternal Jew?" after a 1940 Nazi movie promoted by Third Rich propaganda chief Joseph Goebbels, was produced and posted online by a public funded settlers group at the weekend.

It shows a hook-nosed man addressed only as "The Jew" receiving orders from a European named Herr Sturmer, in an evocation of the Nazi era magazine Der Sturmer.

The master repeatedly buys from him made-up slanderous information about Israeli and its military that then becomes front page news on a newspaper called Hasmol (The Left).

"Get me something on children," Herr Sturmer says throwing a golden coin to The Jew character. The next day the newspaper headline with "Israel kills twenty years old Palestinian babies [sic]".

After a series of similar missions The Jew character is ordered to "go take care of yourself" and commits suicide.

"Europeans may seem different to you, but to them... you are exactly the same," a voiceover says at the end while the logos of numerous left-lining NGOs including rights group B'Tselem and the dovish Gush Shalom.

The not-so subtle message of the video was explained in accompanying text that reads: "Dozens of radical leftist organisations receive millions of euros from Europe. In the best case scenario they believe that they are leading us into becoming a more enlightened, polite and cleaner country.

"Well, for the Europeans, for the past hundreds of years you have been good for only one thing. The money that seems to you so shiny when it slanders settlements and soldiers will at the end be revealed to you as a unique self-destruction budget."

The clip triggered a furious reaction from Israel's progressive environment.

The Meretz party and Peace Now organisation urged the Attorney General to open a criminal investigation for incitement against the Samaria Settler Council, the non-profit group behind the video, which is funded by the Samaria Regional Council, local authority financed with taxpayers money, Ynet reported.

Right-wing Prime Minister Benjamin Netanyahu also condemned the clip saying he stands "stridently against the comparison between organisations or Israeli individuals -- from any political stripe -- and Nazi Germany, and condemn any use of it for elections," according to Haaretz newspaper.

Pro-settlements leader Naftali Bennett claimed on Army Radio that the footage was "inappropriate but its content is very true".

The controversy comes during a heated electoral race that currently sees Netanyahu's Likud party marginally leading the opinion polls.

Israelis are to vote on 17 March.