"The best answer to terrorism is the expansion of settlements", Mr Lieberman said. Under global law, all Israeli settlement activities in the occupied territories are illegal.
The military said it detained four Palestinians for questioning and set up security inspections at entrances to Kauber, the assailant's village, north of Jerusalem.
Conricus said the attacker, from the Palestinian village of Kobar, had been shot by a civilian who was passing at the time and witnessed the incident.
Simon Wiesenthal Center Associate Dean Rabbi Abraham Cooper said in a statement sent to the Journal, "Palestinian Authority and Hamas brainwashing another generation pays off when a 16 year-old Palestinian attacks an Israeli home leaving one dead and two injured". Two more settlers were also wounded during the attack.
Some 300 Palestinians - a lot of them assailants, Israel says - have also been killed in that period, according to news agencies.
Israel strikes Hamas targets in Gaza after troops attacked
The Israeli military launched artillery strikes on seven Hamas positions in the Gaza Strip on Wednesday evening after an IDF officer was moderately wounded when a group of troops patrolling the border came under sniper fire.
Lone Palestinian attackers have carried out multiple attacks against Israelis in recent years in the West Bank, Jerusalem and elsewhere.
Hamas Chief Ismail Haniyeh looks on as he attends the funeral of Palestinian Hamas militants who were killed in Israeli tank fire, at a mosque in Gaza City July 26, 2018.
The protests also demand a "right of return" for descendants of Palestinian refugees to ancestral homes in what is now Israel.
The Palestinian Islamist movement Hamas, which rules Gaza, praised the "courageous operation" in the West Bank, without claiming responsibility for it.More news: Greece: Major forest fires rage near Athens as homeowners flee