A statement from the US State Department urged Israel to "apprehend the murderers" and called on both sides to "avoid escalating tensions in the wake of this tragic incident."
Earlier, a gang had firebombed two homes in the village of Duma in the Israeli-occupied West Bank, wounding four family members and killing baby Ali Saad Dawabsha.
The family's small home was blackened and gutted by fire and a Star of David along with "revenge" and "long live the Messiah" was spray-painted in Hebrew on the walls.
US State Department spokesman Mark Toner said Washington "condemns in the strongest possible terms last night's vicious terrorist attack in the Palestinian village of Duma.
"We convey our profound condolences to the Dawabsha family and extend our prayers for a full recovery to those injured," he added.