A senior Israeli army commander has warned that unchecked "Jewish terror" against Palestinians in the occupied West Bank threatens to plunge the territory into another conflict.

In unusually outspoken comments, Major General Avi Mizrahi took aim at extremist Israeli settlers, and said the yeshiva, or religious seminary, in Yitzhar, one of the most radical Jewish strongholds in the West Bank, should be closed, calling it a source of terror against Palestinians.

The general's comments are likely to put him at odds with Israel's pro-settler government, which has resisted US-led efforts to curb settlement expansion in a bid to revive stalled peace talks. The foreign minister, Avigdor Lieberman, himself lives in a West Bank settlement. All settlements are regarded as illegal under international law.

The army has anxiously watched an upsurge in violence by hardline settlers, who in recent months have set fire to a West Bank mosque, burned Palestinian olive groves, and vandalised Palestinian property. Settlers have killed three Palestinians this year.

"What's happening in the field is terrorism," General Mizrahi told Channel 2's Meet the Press, and it "needs to be dealt with." The Israel Defence Forces (IDF), he said, fears "terrorism against Palestinians is likely to ignite the territories."

The general's criticism points to frustration within the army's high command at their ability to check violent settlers.

Palestinians and Israeli NGOs frequently accuse the army of siding with settlers in conflagrations with Palestinians, prompting the army to respond that it is obliged to protect its citizens and does not set policy.

The number of violent incidents has spiked in recent months, partly because of the murder earlier this year of five members, including three children, from one Jewish family in Itamar, a settlement near Nablus. Two Palestinians were charged with the crime.

Human rights groups suggest that the more radical settlers, many of whom oppose a two-state solution on the premise that the whole of Israel is bequeathed to them by God, are agitating against Palestinian moves to seek statehood recognition at the United Nations in September.

Some fear that the surge in violent attacks against Palestinians could compound rising frustrations with the stalled peace process and trigger more violent riots.

"The army is very afraid that [action by settlers] at a critical moment could set off a Third Intifada," said Adam Keller, spokesman for Israeli human rights body Gush Shalom, referring to a mass Palestinian uprising.

"The fact that the army is nervous is making the settlers more aggressive," he said

The Israeli commander General Mizrahi blamed the courts for failing to rein in the most radical of the settlers – a small proportion of the roughly 500,000 Israeli settlers who are living beyond the Green Line in East Jerusalem and the West Bank.