Authorities intend to investigate relatives of Ahmed Mahmid, an Arab Israeli who was shot dead after attempting to stab a policeman, over suspicions that they violated the agreed-upon terms for his funeral on Monday night.
Law enforcement believe more than 150 people attended the funeral, which they say goes against what was agreed upon with the family.
Police also plan to keep the financial guarantee of 50,000 shekels ($13,690) that the family provided.
Police said in a statement that the agreement with the family was reached on "conditions that allow the remains of the terrorist, Ahmed Mahmid, to be delivered to his family for a funeral in Umm al-Fahm.
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"The terms made by the police were illegally violated after hundreds of participants attended contrary to an order that defined the time of the funeral, the route, and the number of participants [up to 150 family members]."
Mahmid's relatives said Saturday that he suffered from mental distress and that the stabbing attempt was not politically motivated. They also said that he could have been stopped without being killed.
Defense Minister Avigdor Lieberman slammed images from the funeral on his Twitter account, writing: "Are you still asking yourself why Umm al-Fahm needs to be part of Palestine and not Israel? The sights from yesterday of many hundreds of people participating in the terrorist's funeral with Palestinian flags and cries of 'in spirit and blood, we will redeem the martyr,' will finally answer the question for you. The plan I promoted many years ago for territorial and population exchanges is more relevant than ever."
In March, the Knesset approved an amendment that permitted the police to withhold the bodies of terrorists for burial and delay their transfer if it believes the funeral could lead to a loss of life or injury, incitement to terrorism, or general expressions of identification with the terrorist and his actions.