Footage of Friday's incident, at Jelazoun refugee camp in the occupied West Bank, showed troops striking the Palestinian civilian with their fists and a rifle butt.
The beating was accompanied by shouted obscenities as the detainee lay helpless on the ground.
Israeli army radio and news websites said that at an internal disciplinary hearing the company commander was given a verbal reprimand, one soldier was confined to base for 30 days and two others were given suspended sentences of 28 days in military prison.
The military also faces widespread criticism for its actions in the West Bank, where the United Nations says soldiers have killed 11 Palestinians since the start of the year.
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Israeli media quoted brigade commander Colonel Asher Ben Lulu, as saying in his judgement of the soldiers in the Jelazoun incident that "the decision to arrest the man was correct, but the manner in which the arrest was carried out was wrong."
The army had said the soldiers were responding to a violent demonstration by as many as 70 Palestinians who were throwing stones at them.