As troops wrapped up the biggest arrest operation in years, detaining 80 Palestinians overnight -- many of them Hamas members -- Netanyahu pointed the finger of blame directly at the Islamist movement.
"Those who carried out the kidnapping of our youngsters are Hamas people -- the same Hamas with whom Abu Mazen has forged a unity government, which has very serious implications," he said at the weekly cabinet meeting, referring to Palestinian president Mahmud Abbas.
They have been identified as Gilad Shaer, 16, from Talmon settlement near Ramallah, Naftali Frenkel, 16, from Nof Ayalon, and Eyal Ifrach, 19, from Elad, both in central Israel.
US Secretary of State John Kerry condemned the kidnapping, saying "many indications point to Hamas' involvement" and noting that the Islamist militant movement "has used kidnapping in the past".
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Israeli media reported that police had received an emergency call late Thursday, apparently from one of the three who said "we've been kidnapped", but failed to act since it was not clear and was suspected to be a prank.
The reconciliation with Hamas, which is committed to Israel's destruction, enraged Israel, with Netanyahu placing responsibility for the teens' safe return on the shoulders of Abbas and his Palestinian Authority.
The executive committee of the Palestine Liberation Organisation, however, denied Netanyahu's "false accusations", warning of "clear Israeli intentions to broaden settlement activity", using the kidnapping as "a pretext". Netanyahu's accusation was also derided by Hamas.
"These arrests are aimed at breaking the movement and it won't succeed."
He said the wave of arrests overnight, which included Hamas MPs and former ministers, showed Israel was "flailing around in the dark".
But Netanyahu insisted that "Hamas terrorists carried out Thursday's kidnapping of three Israeli teenagers".