Mr Netanyahu did not immediately specify what action he might take after President Mahmoud Abbas signed 15 international conventions, mainly through the United Nations, that Israel fears could give the Palestinians greater leverage against it.
US Secretary of State John Kerry's intensive attempts to put the talks that began in July back on track and extend them beyond an April 29 deadline unravelled in the past week after Mr Abbas's surprise move.
Palestinians said Mr Abbas took the step in response to Israel's failure to carry out a pledge to free several dozen Palestinian prisoners. Israel said it first wanted a Palestinian commitment to keep negotiations going past the end of the month.
"They [Palestinians] will achieve a state only through direct negotiations and not through empty proclamations or unilateral moves, which will only push a peace accord farther away," Mr Netanyahu told the weekly meeting of his cabinet yesterday.
"Unilateral steps on their part will be answered with unilateral steps on our side. We are willing to continue negotiations, but we will not do so at any price," he said.
In an interview with Israeli Army Radio, chief Palestinian negotiator Saeb Erekat bridled at calls by some of Netanyahu's cabinet ministers for economic sanctions against Abbas's Palestinian Authority, which exercises limited self-rule in the occupied West Bank.
"Why are you threatening us as if we are sending suicide bombers to Tel Aviv?" Erekat asked.
In the West Bank city of Ramallah, Safa Nassereldeen, the Palestinian minister of telecommunications, said Israel had told a mobile phone company, Wataniya Palestine Mobile, that it could not bring equipment into the Gaza Strip, where it plans a network.