Security cameras captured a young Arab setting fire to the lobby of an apartment building in Lod where Jews live.
The two suspects - one in his 20s and the other in his 50s - are both residents of Lod and were arrested on Saturday, Israel Police said.
Police also said that the Rishon Lezion Magistrates Court extended the suspects' arrest until Monday.
It is not clear if the act was committed due to criminal motives or due to nationalist (terror) motives.
Police are investigating.
In a tweet, Kan News wrote, "Watch: Arab man from Lod, in his 30s, sets fire over the weekend to the lobby of a building in the city, in which Jewish families live. The suspect was arrested and is known to the police due to drug crimes. It is not clear to police if the crime was nationalist or criminal in nature."