"These operations destroy our efforts in the field of security, which started bearing fruits lately in a way that people felt the change," Fayyad said in a statement.
The exercise, which continues, was the biggest since Palestinian police deployed in the West Bank city as part of a bid by President Mahmoud Abbas to build diplomatic ties with Israel by showing he can rein in militants.
Fayyad masterminded the security plan with Western help after the Abbas government lost control of Gaza to Islamist Hamas in June. He said Israel's actions in Nablus and elsewhere had "a tremendous negative impact on efforts being exerted, including at international level, to revive the peace process."
The rebuke looked likely to add to a mood of recrimination which has muddied Israeli-Palestinian peace talks relaunched at an international conference in Annapolis, Marlyland in November.
U.S. President George W. Bush is due to visit the region next week to discuss the points of dispute with Abbas and Israeli Prime Minister Ehud Olmert.
Olmert said on Sunday there would be no easing of Israel's security measures in the West Bank, which include hundreds of roadblocks that impede Palestinian movement, until Abbas's forces prove effective against militants.
Palestinian authorities say the deployment of their police in Nablus and two other West Bank cities, Tulkarm and Bethlehem, has brought calm, with suspects arrested and weapons seized.
Two off-duty IDF soldiers were killed in a West Bank ambush last week which Olmert's office blamed on members of Abbas's security services. The Palestinians denied that charge and said they had made two arrests.