At least 45 people were killed and hundreds of others injured in the Israeli strike, according to the Hamas-run health ministry.
Speaking in the Israeli parliament on Monday, Netanyahu said it was vital that Israel took "every precaution possible" to protect civilians caught up in the fighting in Gaza, the BBC reported.
But he insisted the Israel Defense Forces (IDF) used their "best efforts not to harm those uninvolved" in the conflict and vowed to keep fighting against Hamas.
"I don't intend to end the war before every goal has been achieved," Netanyahu said during his address.
"In Rafah, we already evacuated about one million non-combatant residents and despite our utmost effort not to harm non-combatants, something unfortunately went tragically wrong," he said, adding "We are investigating the incident".