Last week, heavily armed settlers from the settlement of Yitzhar, near Nablus, vandalised and sabotaged the water supply on which the nearby village of Madama depends.
The latest poisoning is the seventh of its kind during the past three years, according to village officials.
An Israeli army spokesman said the military is looking into the matter.
Yitzhar was established more than 20 years ago on confiscated land belonging to the people of Madama and is inhabited by Talmudic settlers seeking to expel non-Jews from Palestine and Israel.
Jewish settlements built on occupied Palestinian lands are deemed illegal under international law.
According to Madama's local council head Ayid Kamal, Yetzhar has always been "a source of provocation, vandalism and organised terror".
Contaminated water is a cause
of children's stomach infections
"They come in broad daylight and throw filthy materials like diapers and poisonous substances inside the spring's source, and when we complain to the Israeli authorities, they tell us the army cannot do anything about it."
Kamal said the ultimate goal of the settlers is to force the villagers to leave their land.
Last year as many as 12 children in the village were diagnosed with liver infections and many others developed stomach pains as a result of drinking contaminated water.
The Yetzhar settlers also burned down standing crops belonging to the villagers, often in full view of the Israeli army.
Palestinian villagers, as well as some international aid workers, suspect there is connivance between the settlers and local Israeli army members.
The British charity Oxfam had repaired the water system at Madama, covering the natural spring's mouth with concrete.
However, every time new pipes are installed, the settlers smash them and contaminate the spring water by dumping hazardous materials, local residents said.
Palestinians say the settlers'
real goal is to grab their land
In two instances, settlers opened fire on Palestinians and foreign aid workers in the area.
An Oxfam spokesman said the charity would once again try to undo the damage.
"We want to help those helpless people, we hope the Israeli authorities will get serious with the settlers and stop their actions," a spokesman said.