Mr Netanyahu said Mahmoud Abbas had provided encouragement for incidents such as the killing of the three-month-old by a Palestinian driver.
The man drove his car into a crowd at a tram stop, injuring eight others. He died hours after being shot by police.
A spokesman said the incident was being treated as a “terrorist attack”.
“The driver… is a resident of [the East Jerusalem neighbourhood of] Silwan and has a terrorist background. He served time in jail for terror activity,” Micky Rosenfeld was quoted by Reuters news agency as saying.
The driver was identified as 21-year-old Adbel-Rahman Shaloudi, who was shot as he tried to flee the scene on foot.
Shaloudi was the nephew of a leading bomb-maker from Hamas, the Islamist militant group opposed to Israel, who was killed in the West Bank in 1988.
Israel’s Channel 2 television said Hamas had claimed responsibility for the Jerusalem attack, although the group has not issued an official statement.
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