The murderer, believed to be Palestinian militant, remains at-large and Israeli troops have launched a major pursuit with helicopters and drones involved.
"The attacker broke into the house and stabbed the victim to death. Forces are in pursuit of the terrorist," read an official Israeli statement.
Otniel, a Jewish Orthodox Israeli community located in the southern Judaean Mountains, south of Hebron in the West Bank.
A paramedic from Otniel who had arrived shortly after the incident described the murder scene as "difficult."
"The sight was difficult, we saw an unconscious woman aged around 40, who was not breathing and had no pulse," Noam Bar, a senior Magen David Adom (MDA) paramedic, said.
"She suffered from stab wounds to her upper body; we performed continued resuscitation but in the end we were forced to pronounce her death," said Bar.
The Otniel's inhabitants were urged to stay indoors after the recent bloodshed.
The attack succeeded the arrest of an Arab woman who carried a knife in her bag and was allegedly plotting a stabbing at the western gate of Kiryat Arba on the way to Hevron.
Our hearts mourn-w/ all Israel-the passing of Dafna Meir,a mother of six children. May her memory be for a blessing. pic.twitter.com/SRzS0smAdB
— CUFI (@CUFI) January 17, 2016
"I want to give strength to all the children of the family. All of us are hurting and share in the painful grief. We will find the terrorist, and he will pay the full price for this heinous murder," said Prime Minister Benjamin Netanyahu.
Series of stabbing attacks erupted in the West Bank last year and last the third month and the total Palestinian death toll for October-December stands at 135. However, it's the first report of a stabbing attack to take place inside an Israeli house.
By November 2015, the Israeli security forces arrested 15 Palestinians on suspicion of terrorism in West Bank in overnight raids.
