Israeli Prime Minister Benjamin Netanyahu declared a state of emergency in Lod, near Tel Aviv, after reports on Tuesday of Arabs setting fire to a synagogue and Jews stoning a car that was being driven by an Arab resident.
Violence in mixed Jewish-Arab towns flared early on Wednesday amid growing anger in the country's Arab minority over Israeli air strikes on Gaza and police raids on Jerusalem's Al Aqsa Mosque.
"We have lost control of the city and the streets," mayor of Lod Yair Revivo told Israel's Channel 12 News. Rubbish bins, knocked over and set ablaze, could be seen near by.
Security officials said they reassigned 16 border police companies to Lod from the occupied West Bank to deal with the violence.
Police arrested dozens of people overnight in Lod as well as in majority-Arab towns in central and northern Israel, including Umm Al Fahm along the West Bank border and Jisr Al Zarqa on the Mediterranean coast.
Israeli media reported that Uri Buri, a popular Jewish-owned fish restaurant in the mixed coastal city of Acre, had been set ablaze. Footage broadcast by Channel 12 showed the restaurant's exterior blacked and burnt, with its windows smashed.
In Jaffa, near Tel Aviv, Arab protesters clashed with police, who fired stun grenades to disperse them.
Areas with Arab residents, including Lod and Jaffa, were among those in which sirens were triggered by rockets fired from Gaza. Two Lod residents died on Wednesday after a vehicle in the area was hit by a rocket, Israeli police said.