BEIT FAJAR, WEST BANK - Arsonists set fire to a mosque in this Palestinian town early Monday, charring Korans, burning holes into the carpet and scrawling "revenge" in Hebrew near the doorway.

The attack, which residents blamed on Jewish settlers, threatened to stir passions amid a crisis in Israeli-Palestinian peace talks over settlement construction. It was strongly condemned by Israeli Prime Minister Binyamin Netanyahu and Defense Minister Ehud Barak.

Netanyahu's office said he had ordered the security forces to "act firmly to quickly uncover the criminals and bring them to justice." Barak said in a statement that "whoever perpetrated this act is a terrorist in every sense of the word, whose sole intention is to hurt the chances of achieving peace and dialogue with the Palestinians."

The Israeli police and army said an investigation was underway in cooperation with Palestinian security forces.

The arson was the third incident of vandalism in a West Bank mosque in the past year, and it carried a hallmark of previous assaults on Palestinian property: the words "price tag" written on a wall. The term has been used by militant settlers to describe violence against Palestinians in response to moves against settlers by Israeli authorities.

Netanyahu is under intense international pressure to extend a moratorium on new settlement construction after a 10-month freeze expired last week, leading to an effective suspension of the peace negotiations. Settlers have voiced concern that Netanyahu will renew the building restrictions.

Witnesses at Beit Fajar, a major stone-cutting center south of Bethlehem, said that a car carrying several people pulled up at the mosque about 3 a.m. and that a fire was blazing after they left.

"We smelled smoke, and young men outside were shouting that the mosque is on fire," said Maryam Ismail, who lives across the street. She said neighbors rushed over with hoses and buckets to douse the flames.

Throughout the day, men gathered at the mosque to survey the damage. There were large, scorched gaps in the carpet, linked by a snaking trail of flammable fluid. The walls and ceiling were covered with soot, and a box of singed Korans was removed by Palestinian police officers. "A mosque must be burned," was scrawled in Hebrew near the door, along with a Star of David.

"This is a crime against the Muslim faith," said Sheik Kamel Deiriya, a local cleric. "It shows their barbarity. It is part of a conspiracy against the mosques in Palestine."

Muhammad Ayish, the Palestinian Authority official in charge of Muslim institutions in the Bethlehem area, said the aim of the attack was "to provoke religious feelings" and "inflame the situation, so we go back to zero."

As if to illustrate his words, a group of boys who arrived on their way home from school held up copies of the Koran and chanted slogans in front of television cameras. "Death to Israel!" they cried. "Death to the Jews!"

Residents said that it was the first such attack in Beit Fajar and that there was generally little trouble with neighboring Israeli settlers, who come to the town to purchase stone, which is also shipped to Israel.

Shaul Goldstein, head of the neighboring Gush Etzion settlement council, said that relations with the Palestinians in the area were good and that a group of rabbis from the settlements planned to visit the mosque to express their concern.

Goldstein said he had called Palestinian community leaders to denounce the attack. "I said that we don't know who did this, but we're against it," he said. "Relations are excellent, and somebody is trying to destroy this. We're working hard against our extremists."