"I say again that Israel will not allow Iran to develop nuclear weapons," Netanyahu said, according to a statement from his office.
"On this day I also call on all European countries to stand behind their commitments. You committed to act the moment Iran violates the nuclear agreement, you committed to activate the mechanism for automatic sanctions that was set in the (UN) Security Council," he said.
A European diplomat told Reuters there was a mechanism under the agreement to deal with "any inconsistencies," and it would be up to a joint commission of signatories to decide next steps.
Iran's move was the first major step in violation of the deal since the United States pulled out of it more than a year ago and reimposed tough economic sanctions on Iran.
Enriching uranium to a low level of 3.6% fissile material is the first step in a process that could eventually allow Iran to amass enough highly enriched uranium to build a nuclear warhead.
Two Iranian sources confirmed earlier Monday that Tehran has breached the limit of its enriched uranium stockpile set in the 2015 deal.
"As we announced when we said our steps would continue, the stockpile has passed 300 kg," one of the sources said.
Earlier on Monday, Energy Minister Yuval Steinitz accused Iran of pursuing "nuclear blackmail" by stockpiling more low-enriched uranium than permitted under the deal but said continued international pressure would cause Tehran to back down.
"It's a blatant violation of the agreement," Steinitz said on Kan public radio. "Iran is carrying out nuclear blackmail. It is saying to the world, 'Look how close we are to a nuclear weapon'.
"Iran's economy is collapsing ...they are under atomic pressure, so they are taking unbalanced actions," he added.
"If the pressure continues, and the world doesn't give in, they will give it up."
Last Wednesday, the IAEA verified that Iran had roughly 200 kg of low-enriched uranium, just below the deal's 202.8 kg limit, three diplomats who follow the agency's work told Reuters. On Monday, the IAEA was not immediately available for comment.
After talks on Friday in Vienna, Iran said European countries had offered too little in the way of trade assistance to persuade it to back off from its plan to breach the limit, a riposte to U.S. President Donald Trump's decision last year to quit the deal and reimpose economic sanctions.
The deal between Iran and six world powers lifted most international sanctions against Iran in return for restrictions on its nuclear work aimed at extending the time Iran would need to produce a nuclear bomb, if it chose to, from roughly two to three months to a year.
Iran says its nuclear program is solely for peaceful purposes, including generating power.