His comments came after Palestinian President Mahmoud Abbas signed 15 international conventions that could pave the way for a renewed attempt to get UN statehood.
"Unilateral actions from the Palestinians will be answered with unilateral actions from our side," Netanyahu said during his weekly cabinet meet, the Guardian reported Sunday, adding that he blamed the Palestinians for the current impasse over the US-sponsored peace talks.
He also said Israel was not afraid of UN intervention and that the Palestinians had "a lot to lose" if they were to pursue their attempt to gain UN statehood, which was shelved last year as a concession to Israel, which released 104 Palestinian prisoners in return.
The comments have come ahead of Monday's crucial Knesset debate, called by 25 members of the Israeli parliament, to discuss the progress "or lack of it" of the peace initiative sponsored by the US secretary of state, John Kerry. It will also discuss the government's failure to secure the release of the Israeli spy Jonathan Pollard.
There is, however, no clear indication yet of what form Israeli unilateral action could take, but the Israeli media reported that it could include withholding of taxes collected by Israel from the Palestinian Authority (PA).
Israel did it in 2012, sparking unrest in the Israeli-occupied West Bank.
Last Thursday, Israel scrapped the scheduled release of a group of Palestinian prisoners, a condition of Palestinian participation in the talks.