* Palestinian official: Youth was burned alive
* Israel launches air strikes in Gaza
* Militants keep firing rockets at Israel (Adds two wounded from Israeli air strikes, militant rocket fired at Beersheba)
By Ali Sawafta
RAMALLAH, West Bank, July 5 (Reuters) - Violent protests sparked by the abduction and killing of a Palestinian teenager spread to Arab villages in Israel on Saturday, presenting a new challenge to the government of Prime Minister Benjamin Netanyahu.
Israel has stayed silent on the investigation into the death of an East Jerusalem youth who Palestinians believe was kidnapped and killed by far-right Jews, but the Palestinian attorney-general was reported as saying he had been burned alive.
"The direct cause of death was burns as a result of fire and its complications," Mohammed Al-A'wewy was quoted as saying by the official Palestinian news agency Wafa late on Friday.
Israeli-Palestinian tensions have risen sharply since three Israeli teens were kidnapped on June 12 and later found dead in the occupied West Bank.
This was followed on Wednesday by the kidnapping of Mohammed Abu Khudair, 16, in his neighbourhood in East Jerusalem. His charred body was found hours later in a forest on the edge of the city.
Saber Al-Aloul, the director of the Palestinian forensic institute, attended the autopsy, which was carried out by Israeli doctors. Al-A'wewy said Al-Aloul had reported soot had been found in Khudair's respiratory canal, which meant that "the boy had inhaled this material while he was burnt alive."
Burns covered 90 percent of the body and there was a cut to the head. Samples such as fluids and tissue were taken for more lab examinations to complete the legal medical report.
At Khudair's funeral on Friday, furious Palestinians chanted "Intifada! Intifada," calling for a new uprising against Israel. Stones thrown at Israeli police were met by tear gas, stun grenades and rubber bullets in one of the most highly charged displays of enmity in Jerusalem in years.
At least one Palestinian was hurt in confrontations in the city of Nablus overnight, medical staff said.
STONE AND FIREBOMB ATTACKS
The protests spread on Saturday to normally calm Israeli Arab areas, mainly along roads in the centre and north of the country where protesters threw stones and firebombs at passing cars. Dozens were arrested in these clashes, a police spokeswoman said.
A Jewish driver was forced from his vehicle and told to flee before his car was burned at one location while at another, a woman suffered light injuries from rocks thrown at her car.
Palestinian officials trying to calm tensions have said they would prevent any intifada, or uprising, and seek a solution to the crisis that began when the three Israeli teens were kidnapped.
The discovery of the bodies of the three Jewish seminary students on Monday prompted an outpouring of national grief in Israel.
Many Palestinians, including President Mahmoud Abbas, assert that Khudair was the victim of far-right Jews incensed at the Israeli deaths.
Netanyahu has called Abu Khudair's killing "loathsome" and ordered a swift police investigation.
Israeli authorities said they did not yet know whether Abu Khudair was indeed the victim of a hate crime.
Tensions also persisted on Saturday along the frontier with the Gaza Strip, where Israeli warplanes bombed three Hamas targets in response to mortar and rocket fire at Israel. Two Palestinian policemen were hurt in a later air strike, Gaza hospital officials said.
There were no reported casualties in the air raids or from the 15 rockets fired at Israel, one of which was shot down by Israel's Iron Dome interceptor system over Beersheba, the first time a rocket has been launched at the major city since 2012.
Israel mobilised ground forces on Thursday along the Gaza frontier in a threat to invade if rocket fire from the enclave did not stop. Egypt, a bordering country, has tried to mediate a truce to prevent an escalation of these hostilities. (Additional reporting by Ori Lewis in Jerusalem and Nidal al-Mughrabi in Gaza; Editing by Lisa Shumaker)