"I didn't see the settlers but I am certain that they did it because of their previous attacks on the village."
The Civil Administration, Israel's civilian government authority in the occupied West Bank, says it is investigating the fire. Israeli media report that the fire could have been the result of an electrical malfunction.
Israeli army officials have yet to comment on the incident.
Luban Al Sharqiya is a small village surrounded by three illegal Jewish settlements: Elieh, Labuneh, and Shilo.
"Residents there report settler attacks are widespread," Al Jazeera's Nour Odeh, reporting from the village, said.
Israeli security officials acknowledge that settler attacks in the West Bank have increased over the past few months.
Last month, a mosque in the village of Huwarawas vandalised. Residents found graffiti, including a Star of David, scrawled on the walls.
Two weeks later, settlers were blamed for uprooting hundreds of olive trees and burning several cars in the same village.
And in December, settlers burned a mosquein the village of Yasuf.
The Israeli army said last month that it would establish a task force to investigate these so-called price tag attacks.
Vandals occasionally spray-paint the words "price tag" on buildings and cars, suggesting that the attacks are the "price" for any attempt by the Israeli government to curb the growth of illegal settlements.
Human rights groups say the Israeli government does not take the attacks seriously enough.
A recent report from Amnesty International- the London-based rights group - found that "impunity remains the norm" for settlers accused of vandalism and physical attacks on Palestinians.
The fire comes as Israeli and Palestinian officials are preparing to resume indirect negotiations on Wednesday.
Palestinian leaders are pushing for a complete freeze in new Israeli construction in both the West Bank and East Jerusalem.
Israeli prime minister Benjamin Netanyahu last year approved a temporary halt in West Bank growth -- but it does not apply to East Jerusalem, and many communities in the West Bank have ignored the orderand continued new construction.