Mr Sanders, who is one of the frontrunners in the contest, said he was “very proud” to be Jewish when he was asked about his position on Israel during the debate in Charleston, South Carolina.
“I actually lived in Israel for some months. But what I happen to believe is that right now, sadly, tragically, in Israel through Bibi Netanyahu you have a reactionary racist who is now running that country,” he added.
Mr Sanders said Israel’s independence and security should be protected, but that “you cannot ignore the suffering of the Palestinian people.”
He also suggested he would consider reversing president Trump’s May 2018 decision to move the US embassy from Tel Aviv to Jerusalem.
The embassy move was met with international criticism for recognising the contested city as Israel’s undivided capital when Palestinians have long demanded East Jerusalem as their capital of a future independent state.
East Jerusalem was captured by Israel from Jordan in the 1967 war and later annexed in a move not recognised by most countries but endorsed by president Donald Trump’s Middle East plan.
Israel Katz, Israel’s foreign minister, said on Wednesday that Mr Sanders’s comment on the embassy was “horrifying”.
Speaking to Israel’s Army Radio, Mr Katz said Mr Sanders had a history of “attacking” the identity and national security of Israel.
He added: “Naturally, people who support Israel will not support someone who goes against these things.”
His comments come a few days after he raised his concerns about AIPAC, a pro-Israeli lobby group, tweeting on Sunday that it provides a platform “for leaders who express bigotry”.
He added that he would not be attending this year’s AIPAC conference as a result.
Mr Sanders is not alone in claiming that Mr Netanyahu is racist.
Beto O’Rourke, who was then a Democratic presidential candidate, described Mr Netanyahu as a “racist” in April last year, saying he was an obstacle to peace in the Middle East.
Shortly before the Israeli election in September 2019, Mr Netanyahu’s Facebook page was sanctioned for hate speech after one of its post warned against a government composed of “Arabs who want to destroy us all – women, children and men.”
As a result, the page’s automatic chat function was disabled for 24 hours.
Although he denied writing the post, Mr Netanyahu went on to call the Joint List, an alliance of Arab political parties, a “terrorist-supporting fifth column” in November. The Joint List became the third-largest faction in the Knesset, Israel’s parliament, after the 2015 elections.
His government also introduced the “nation-state” law in 2018, which controversially states that “the right to exercise national self-determination” in Israel is “unique to the Jewish people,” and demoted Arabic as an official language.
Critics denounced the law as racist.
On the day of the election in 2015, Netanyahu also warned that the “Arabs are voting in droves,” for which he later apologised.