"Iran is caught in an economic upheaval as a result of the reimposition of the sanctions against it," Netanyahu told a graduation ceremony of pilots at Hatzerim Air Force Base in southern Israel.
He said his government's efforts to increase the sanctions on Iran were effective.
"States and companies are abandoning the Iranian market and the mass demonstrations in Iran show that our efforts to put Iran in its place are bearing fruit," he said.
Netanyahu claimed that the recent protest in Iran is the beginning of a wider popular discontent.
"The Iranian people are feeling in their pockets the consequences of the fundamentalist fanaticism of their rulers," Netanyahu said.
Netanyahu, a vocal opponent of the nuclear deal with Iran, reiterated his position that Iran is trying to develop nuclear weapons to use it against Israel.
Iran denies that it is trying to develop atomic bombs and says its nuclear program is for civil purposes only.
Warning that Iran desires to destroy Israel, Netanyahu stated that Israel "will not allow Iran to develop nuclear weapons," while continuing to take strong actions against Iran's plan to turn Syria into a deadly missile base against Israel.
His remarks came ahead of the scheduled July 16 summit in Finland between Russian President Vladimir Putin and his US counterpart Donald Trump, who are expected to discuss also Israel's demand that Iran pulls all its forces out of Syria.