Two Palestinian attackers died in the explosion late on Friday; four Israeli sailors were wounded.
The radical Palestinian group, Islamic Jihad, said it carried out the attack.
The move comes as the Israeli army continues its offensive in the West Bank, in response to a suicide bombing which killed 12 people, including the bomber, in Jerusalem on Thursday.
The Israeli military said the fishing boat was spotted as it was entering Israeli waters, which are banned to Palestinian vessels.
The patrol boat approached it and tried to make contact with two "suspicious" people on board, the army said.
When there was no response, soldiers sprayed water at the fishing boat and fired warning shots in an attempt to force it back into Palestinian waters, military officials said.
The fishing boat then exploded, injuring the Israeli servicemen and damaging their boat.
Military sources quoted by Israel's Ha'aretz newspaper say Palestinian militants in Gaza are trying to find indirect ways to carry out attacks because they cannot easily cross the separation fence between the Gaza Strip and Israel.
Wanted men
Meanwhile, Israeli troops carried out more raids in the West Bank, following Friday's takeover of Bethlehem.
The army destroyed four homes of suspected Palestinian militants in the area on Saturday.
Troops raided the office of the governor of Bethlehem, Mohammad Madini, and were seen carrying out computers and boxes of papers.
The man named by the Israeli authorities as the suicide bomber in Thursday's attack, 23-year-old Nael Abu Hilail, came from Bethlehem.
On Friday Israeli soldiers destroyed his home and arrested some of his relatives.
Local media say 26 suspects have been arrested in the Bethlehem area so far.
Soldiers also went into the town of Qabatiya in search of wanted militants.
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