"We remember history and we remember what happened when the products of Jews were labelled in Europe," the premier said in a statement issued by his office.
In April, France and 15 other European Union countries urged the bloc to clearly label products sold in member countries that originated in Israeli settlements in the Palestinian territories and annexed east Jerusalem and the Golan Heights, all occupied by Israel in the 1967 Six Day War.
"This is unjust. It's a distortion of justice and of logic, not to mention that it does not advance peace," said Netanyahu.
Tzipi Hotovly, Israel's deputy foreign minister, said the Jewish state would not accept "discrimination" between goods produced in different parts of its territory.
"Labelling of products amounts to a boycott," she said, hours after the European parliament voted in favour of a non-binding resolution to label products from Jewish settlements.
The EU has consistently condemned Israeli settlement building as a threat to the Middle East peace process through eroding the basis for a future Palestinian state.