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The Haifa District Court ruling said Shlomo Haim Pinto, a 32-year-old resident of Kiryat Ata in northern Israel, had on October 13, 2015 set out to "find and kill an Arab" in revenge for nearly daily "terror attacks".
Armed with a kitchen knife, a box cutter and a hammer, he stabbed a Jewish supermarket employee, mistakenly thinking he was an Arab.
The assailant, who confessed, entered a plea of insanity which was rejected.
The court convicted him of attempted murder and possession of a weapon with intent to carry out a racist killing.
His victim, who was wounded, will receive 50,000 Israeli shekels ($13,635, 12,800 euros) compensation from Pinto.
Since a wave of violence broke out in October 2015, 252 Palestinians, 41 Israelis, two Americans, a Jordanian, an Eritrean and a Sudanese have died.
Most of the Palestinians killed were carrying out knife, gun or car-ramming attacks, according to Israeli authorities, with others killed during protests, in clashes or Israeli air raids on Gaza.
The rate of attacks has declined sharply in recent months.