Omar Al-Abed, who is 19 years old, was shot and wounded by an off-duty soldier at the scene of the July 21 attack. He was later arrested.
Israeli Prime Minister Benjamin Netanyahu called him a “beast” who was incited to hate Jews.
Wednesday’s actions follow similar destruction of homes of Palestinians who carry out attacks on Israelis. The destructions are meant as a deterrent.
Police said they will charge five members of Al-Abed’s family for failing to stop him from carrying out the stabbing. The five were arrested and face prosecution for failing to prevent a crime.
Meanwhile, Israel is pressing ahead with construction of an underground barrier along the border with the Gaza Strip in an ambitious project meant to halt the threat of attack tunnels built by the Hamas militant group.
Cranes and work crews are digging holes and installing sensors and other equipment for a structure that is to stretch along the entire 60-km border when it is complete.
Gadi Yarkoni, head of a local council, said the project is a key reason the area has enjoyed a surge in growth and attracted young families since a devastating war with Hamas three years ago.
In the 2014 war, Hamas militants made their way several times into Israel through a tunnel network, terrifying locals.
Yarkoni said “building the barrier is the right thing to do.”
In a separate development, the daughter of the American ambassador to Israel, David Friedman, has immigrated to Israel and taken Israeli citizenship.
The 24-year-old Talia Friedman arrived at Ben Gurion Airport on Tuesday on a charter flight carrying over 200 new immigrants from North America and was greeted by her father.
Friedman, President Donald Trump’s former bankruptcy attorney, was appointed ambassador earlier this year. His appointment was opposed by Democrats and some Jewish groups because of donations to Israeli settlements, opposition to Palestinian statehood and vocal support for hard-line Israeli government positions.
Friedman told Israeli media that he was proud of his daughter. He said that “she loves Israel, we all love Israel. Our whole family loves Israel.”
Friedman is a member of Trump’s team spearheading efforts to restart Israeli-Palestinian peace talks.