Three Israelis were seriously wounded in the attack just outside Jerusalem's Old City and one of the victims may have also been wounded by police gunfire.
Israeli military commanders and the Netanyahu government have sparred over the right strategy to end two months of stabbings, shootings, and car-based attacks.
A 13-year-old girl was one of four people injured in the latest stabbing incident in Israel. An Arab man was also hospitalized after he was reportedly mistaken for the assailant and beaten.
A string of attacks in Jerusalem and near Tel Aviv have killed three and injured several more and Israeli Prime Minister Benjamin Netanyahu has called a cabinet meeting to discuss new operational plans.
The woman and her three-year-old daughter reportedly died when their home collapsed after Israeli aircraft bombed two suspected Hamas weapons manufacturing sites.
Three Israelis have been killed in stabbings in Jerusalem since Thursday as tensions rise over access to the long-contested al Aqsa mosque complex, a site revered by Jews and Muslims, and in the West Bank.
Palestinians took the streets to protest a ban on entering Jerusalem's Old City imposed by Israeli authorities after a pair of stabbing attacks.
With Muslims and Jews observing major religious holidays, violence in Jerusalem has spread to the occupied West Bank after a bloody week at a contested holy site.
Palestinian protesters barricaded themselves inside the building in the Old City of Jerusalem in an attempt to stop Jewish worshippers from entering.