The committee will submit its findings to the parliament within 10 days.
Israeli troops, backed by tanks and a helicopter gunship, raided the prison complex last week and seized top Palestinian fighter Ahmad Saadat and 32 others before leaving the normally quiet border town.
Two Palestinian police officers and two prisoners were killed, including one who died from his injuries on Monday.
The Palestinian public was incensed by scenes of Palestinian policemen forced by Israeli troops to strip down to their underwear in front of television cameras.
Paletinian officials condemned the Israeli raid and were unanimous in supporting an investigation.
"That was an act of piracy and brigandage," said Fatah politician and former Palestinian negotiator Saeb Erikat. "Israel wouldn't have embarked on this criminal act without an American green light."
Muhammad Dahlan, the former chief of the preventive security force in Gaza, said he had no doubt that the seizure of Saadat was carried out "in collusion with the Americans".
Ibrahim Salem, a Hamas official, put some of the blame for the raid on the Palestinian Authority.
"The PA can't be blameless. The Israeli army took 45 minutes to reach the premises of the prison and this happened in broad daylight," Salem said. "The PA could have behaved in one way or the other during this period."
Salem suggested that the PA should have smuggled Saadat and his colleagues out of the prison.
After the raid, some Fatah leaders suggested that Mahoud Abbas, the Palestinian president, should consider dissolving the PA and transfer responsibility for the occupied territories to Israel because the raid proved that "the Palestinian Authority was without any authority".
Despite the acrimonious exchanges, lawmakers voted unanimously to form a committee to investigate the raid.
They also agreed to issue a statement denouncing any harassment of foreigners in the occupied Palestinian territories as "incompatible with Palestinian traditions of hospitality".
Earlier, during the morning session, lawmakers adopted resolutions outlawing "political detentions" and ending security coordination with Israel. Hundreds of political activists opposed to the Oslo Accords were detained without charge or trial by PA security agencies from 1995 to 2000.
Many of the elected Hamas legislators themselves were detained, and some say they were tortured.