27 August 2012
Last updated at 09:33 GMT
The three children, aged 12 to 13, are all from Bat Ayin, an Israeli settlement south of Jerusalem.
The incident is the second high-profile case this month where young Israelis have been accused of attacking Arabs.
Hours after the taxi attack, a mob of Jewish youths - some as young as 13 - attacked a Palestinian teenager in central Jerusalem, leaving him criticially injured.
The taxi attack took place on 16 August near Bat Ayin as members of a Palestinian family, including two children, where travelling in the vehicle.
The car burst into flames and flipped over after being hit by the device.
Debate
"Police have arrested three suspects, all of them between the ages of 12 and 13... under suspicion of being connected with the incident two weeks ago in which a Molotov cocktail was thrown at a Palestinian taxi," police spokesman Micky Rosenfeld told AFP news agency.
The arrests were made on Sunday and, according to the Jerusalem Post, the three may be released on Monday after questioning.
Their lawyer, David Halevi, said this indicated that "the police have no meaningful evidence against his clients".
The attack was condemned both by the US State Department and Israeli Prime Minister Benjamin Netanyahu.
The BBC's Jon Donnison, in Jerusalem, says the incidents have ignited a debate about racism and moral values among young people in Israeli society.
In recent months, Jewish radicals have carried out attacks in retaliation for Israeli government action against settlement expansion.
Mosques, private Palestinian property and Israeli security forces installations in the West Bank have been targeted.
About 500,000 Jews live in more than 100 settlements built since Israel's 1967 occupation of the West Bank and East Jerusalem. The settlements are considered illegal under international law, though Israel disputes this.
Israel arrests three children over taxi attack
Three Israeli children have been arrested on suspicion of fire-bombing a Palestinian taxi.
Six people were injured, two seriously, in the attack, which
targeted an Arab family on their way to the supermarket in the West
Bank.The three children, aged 12 to 13, are all from Bat Ayin, an Israeli settlement south of Jerusalem.
The incident is the second high-profile case this month where young Israelis have been accused of attacking Arabs.
Hours after the taxi attack, a mob of Jewish youths - some as young as 13 - attacked a Palestinian teenager in central Jerusalem, leaving him criticially injured.
The taxi attack took place on 16 August near Bat Ayin as members of a Palestinian family, including two children, where travelling in the vehicle.
The car burst into flames and flipped over after being hit by the device.
Debate
"Police have arrested three suspects, all of them between the ages of 12 and 13... under suspicion of being connected with the incident two weeks ago in which a Molotov cocktail was thrown at a Palestinian taxi," police spokesman Micky Rosenfeld told AFP news agency.
The arrests were made on Sunday and, according to the Jerusalem Post, the three may be released on Monday after questioning.
Their lawyer, David Halevi, said this indicated that "the police have no meaningful evidence against his clients".
The attack was condemned both by the US State Department and Israeli Prime Minister Benjamin Netanyahu.
The BBC's Jon Donnison, in Jerusalem, says the incidents have ignited a debate about racism and moral values among young people in Israeli society.
In recent months, Jewish radicals have carried out attacks in retaliation for Israeli government action against settlement expansion.
Mosques, private Palestinian property and Israeli security forces installations in the West Bank have been targeted.
About 500,000 Jews live in more than 100 settlements built since Israel's 1967 occupation of the West Bank and East Jerusalem. The settlements are considered illegal under international law, though Israel disputes this.
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