Shvuel Schijveschuurder, 27, whose parents and three siblings were killed in the 2001 terror attack at the Sbarro restaurant in Jerusalem, attacked the memorial late Thursday night to protest the Israeli government's decision to free more than 1,000 Palestinian prisoners in a swap for captured Israeli soldier Gilad Shalit.
Two of the prisoners listed among those to be released were involved in the Sbarro attack.
Schijveschuurder spray painted the words "price tag" and "release Yigal Amir," Rabin's assassin, on the memorial.
He was taken into custody by Tel Aviv police and was expected to be questioned and released on Friday.
Some 450 of the Palestinian prisoners to be swapped for Shalit are scheduled to be released on Sunday; Shalit is slated to be released next Tuesday.