JERUSALEM -- Prime Minister Benjamin Netanyahu of Israel responded on Sunday to the killing of an Israeli soldier by a Palestinian co-worker with a vow to fight "terror with all the means at our disposal," as other politicians suggested that the episode threatened Israel's nascent peace talks with the Palestinians.

"The people of Israel share your loss," Mr. Netanyahu said in a message to the soldier's family. "This atrocious act proves once again that the battle against terror is unending."

The Israeli authorities said that the co-worker, Nidal Omar, 42, had persuaded the soldier, Sgt. Tomer Hazan, 20, with whom he worked at a restaurant outside Tel Aviv, to get into a taxi with him on Friday. Mr. Omar took him to a Jewish settlement in the West Bank and then to his family's village nearby, later killing him and hiding his body in a well, they said.

Mr. Omar hoped to use the soldier's body as leverage to pressure Israel to release his brother from prison, officials said, a strategy the military said had been a growing threat from Palestinian militants in recent months.

Eight Palestinians in all were arrested on Saturday on suspicion of involvement in the case.

It remained unclear Sunday how Mr. Omar had persuaded Sergeant Hazan to go with him to the village, which is unusual for Israelis, and something the authorities constantly warn soldiers against. But a woman who identified herself as a friend of the dead soldier told Army Radio Sunday that Mr. Omar had tried to lure Israelis before, and other reports in the Israeli news media suggested he might have used a business or criminal deal as pretext.

"Nidal must have been planning this for a very long time; he must have tried to make deals with us," the woman, who did not give her name, said in the radio interview. "He didn't have his eye on Tomer right away. At first, he tried to take other people. But it seems Tomer fell for this because Tomer is naïve."

Protesters -- who noted that Mr. Omar had been hired despite lacking the required permit to work or live in Israel -- continued to gather Sunday in Bat Yam, a coastal city south of Tel Aviv, outside the shuttered restaurant, where memorial candles spelled out the soldier's name and the owner posted a banner expressing sorrow. A funeral for Sergeant Hazan, who had been in the Air Force, was planned for 4 p.m. Sunday.

In a separate case, the Israel police announced that a soldier was arrested on Saturday and accused of driving 23 Palestinians lacking work permits from the West Bank into the center of Israel.

Sergeant Hazan's killing followed several episodes this summer in which Israeli soldiers killed Palestinians during night raids in the West Bank, heightening tension between the two sides as a series of secret negotiations took place. The death reignited Israeli fears amid reports that 37 plots to abduct soldiers had been thwarted so far this year, far more than in 2012, and revived the debate over Israel's release last month of the first 26 of a promised 100-plus long-serving Palestinian prisoners as part of the Washington-brokered peace talks.

"The rationale behind the murder of the soldier is tragic proof that the release of terrorists is wrong," said Tzipi Hotovely, a right-wing Parliament member from Mr. Netanyahu's Likud Party. "The Palestinian masses now believe that the kidnapping of soldiers or bodies is an effective means to negotiate with Israel on the release of murderers."

Avigdor Lieberman, a former foreign minister who is the prime minister's political partner, said the killing proved that President Mahmoud Abbas of the Palestinian Authority "has no desire or intention of peace with the people of Israel." Complaining that there had been no official condemnation by the Palestinian leadership, Mr. Lieberman said in a Facebook post, "They continue to encourage and support the murder of Israelis."

But Shelly Yacimovich, a Labor Party lawmaker who leads Israel's opposition, called on Mr. Netanyahu "not to surrender to terror and to continue the negotiations." And Robert Serry, the United Nations special coordinator for the Middle East peace process, noted in a statement that "this shocking murder follows a series of violent incidents in the West Bank" and said that the need for calm is "all the more important at this critical moment in the political process."

According to Mr. Omar's relatives, he is married to an Israeli citizen, lives in the Arab-Israeli town of Jaljulia with her and their eight children, and had earned about $2,500 a month at the Bat Yam shop for the past four years.

But Lt. Col. Peter Lerner, an Israeli military spokesman, said Mr. Omar was working and living in Israel illegally.

Colonel Lerner said Mr. Omar's imprisoned brother, Nur ad-Din Omar, had been incarcerated since 2003 and was a member of the Tanzim militia, an offshoot of the Fatah faction.

Another brother, Mahmoud Abdullah Omar, said Nur Omar was serving a 30-year sentence for a shooting that had injured Israel soldiers. Mahmoud Omar said six of his brothers were among those arrested on Saturday, after a large Israeli force stormed the family compound at 3 a.m. with three dogs and stayed until 4 p.m.

"I condemn what he did a million times," said Mahmoud Omar, who was not arrested. "He ruined our lives."

The Facebook page of the Bat Yam restaurant, Tzahi Meats, was filled on Sunday with angry posts on the hiring of Palestinian workers, with several calling on the owner to close its doors and one suggesting he reopen in the West Bank city near where the killing took place. The owner told an Israeli television station on Saturday night that he believed Mr. Omar had the proper work permit.

In an interview with Israel's Channel 2 news, the owner, who was not identified, said of Sergeant Hazan, "He was like my son -- there's no other boy like him." He added that Mr. Omar "was on good terms with everyone, nice as can be."

Reporting was contributed by Said Ghazali from Beit Amin, West Ban; Carol Sutherland and Irit Pazner Garshowitz from Jerusalem; and Isabel Kershner and Rina Castelnuovo from Bat Yam.