An Israeli court has jailed two Jewish youths, one for life and the other for 21 years, for the murder of a Palestinian teenager in Jerusalem, a crime that helped trigger the 2014 Gaza war.

The youths - unnamed because of their age - and a man, who organised the murder, were found guilty in November of the abduction, bludgeoning, strangling and burning of 16-year-old Mohammed Abu Khudair on July 2, 2014.

All of them had confessed and said the murder was revenge for the killing of three Israeli youths by Hamas in the occupied West Bank days beforehand, prosecutors said.

The incidents raised tensions, and a seven-week Israeli offensive against the Hamas-run Gaza Strip began on July 8 after cross-border Palestinian rocket attacks and an Israeli round-up of suspected militants in the West Bank.

Now tensions are intensifying again, with a wave of Palestinian street attacks against Israelis in its fifth month, fuelled in part by Israeli building on land the Palestinians want for an independent state, stalled peace talks, and Muslim anger at perceived Jewish encroachment on a contested Jerusalem shrine.

Abu Khudair's father, Hussein, told reporters at Jerusalem District Court that the family wanted an appeal to the Supreme Court to give the youngest defendant a life prison term as well. The boys were 17 and 16 when they murdered Abu Khudair.

"If there is no apartheid or racism (in Israel), you will have to do this," Hussein Abu Khudair said, saying authorities had been easy on the teenager because he is a Jew not an Arab.

The state had sought life prison terms for both teenagers, but voiced satisfaction with the sentencing.

"I hope that the message will be relayed that actions of this kind are revolting and that we as a society will not accept them," prosecutor Uri Korb told reporters.

The man who organised Abu Khudair's murder, Yosef Haim Ben-David, lodged an insanity plea that has held up his formal conviction and sentencing. A court review of his psychological competence is scheduled for next week.

Mr Korb said that it was too early to know whether the state would appeal the lesser sentence of the younger teen and that the state hoped to quash Ben-David's insanity plea, see him jailed for life and "bring closure of this in the near future".

Avi Himi, lawyer for the younger teenager, said he would advise his client to appeal. "I believe the minor did take part in the incident but not in the actual murder and should therefore have been acquitted of the murder charge," he said.