A military spokeswoman said Israeli forces met no resistance when they intercepted the German-owned "Victoria" some 200 miles from Israel and were taking the vessel to the Israeli port of Ashdod.
Israel maintains a land and naval blockade of the Gaza Strip, a coastal enclave controlled by Hamas, an Islamist movement opposed to peace with the Jewish state.
The military said the vessel had set off from the Syrian port of Latakia and stopped in Mersin, Turkey, before heading toward Alexandria in Egypt. Turkey has no involvement in the arms shipment, the military said.
Palestinians use a network of tunnels to smuggle weapons and other goods from Egypt into the Gaza Strip.
Netanyahu said he personally approved the operation, which he told reporters was carried out "on the high seas in accordance with international law."