Israeli Prime Minister Benjamin Netanyahu on Sunday denounced as "racist" an act of segregation between Jewish and Arab school children at an amusement park near Tel Aviv, dpa reported.
He also condemned recent vandalism against Palestinian property in the occupied West Bank.
"I wish to condemn two phenomena that we have witnessed recently: Racism against Arab Israelis and acts of hooliganism against Palestinians, without any provocation or justification," Netanyahu told his cabinet in Jerusalem.
"We strongly reject these phenomena and will act with all legal means at our disposal to stop them," he said.
Israeli media last week exposed the practice at the amusement park, Superland, in Rishon Lezion, south of Tel Aviv.
A teacher of an Arab school in Jaffa, south of Tel Aviv, had found it difficult to book a date for a day of fun at the park to celebrate the end of the school year.
After several telephone calls, it became clear to him that this was because his pupils were Arab.
The news started a firestorm in Israel, with hundreds of people posting angry messages on the park's Facebook page and calls for a boycott of Superland.
Superland's management in a statement admitted that it had planned a series of separate booking dates in June for Jewish and Arab schools wishing to spend a day there to mark the end of the academic year.
It said it had done so at the request of both Jewish and Arab schools, which had asked for the seperate days in order to avoid "tensions and violence."
But it said it would now "reconsider" the decision out of sensitivity for the "wishes and feelings of all visitors."
Justice Minister Tzipi Livni spoke of a "grave" incident and announced a probe. Education Minister Shai Piron expressed "shock" and called Superland's practice a "despicable phenomenon that has no place in Israel."
Suspected radical settlers last week also torched cars and punctured tires in east Jerusalem and the West Bank to avenge the stabbing death of a Jewish settler a month earlier.