They were placed under demolition orders after the men attacked Israelis last year.
Armed with meat cleavers and a pistol, Abu Jamal and his cousin Uday Abu Jamal killed four rabbis and a policeman before being shot dead in November 2014.
Jaabis rammed an earthmover into a bus on August 4, killing an Israeli and wounding several others. He was shot dead by police at the scene.
An AFP journalist saw the gutted inside of a house in east Jerusalem that witnesses said was the former residence of Abu Jamal.
Yasser Abdu, 40, a neighbour and friend of the Abu Jamals accused Israel of a "policy of collective punishment."
The demolition explosion, which took place at approximately 0220 GMT, blew out the interior of the structure but the supporting pillars remained intact, an AFP journalist said.
The blast damaged other apartments in the building as well as surrounding structures.
Eyewitnesses said police and other authorities arrived yesterday at midnight, locking down the area before drilling and planting the explosives.
A room was also sealed off at the former home of Muataz Hijazi, who in October 2014 tried to gun down a right-wing Jewish activist, critically wounding him. Hijazi was shot dead the next morning during a police raid.
`Intifada` Memories Fresh
The demolitions had been challenged in Israel`s top court which ultimately approved them months ago.
The court also approved sealing the room but not demolishing the structure, since Hijazi`s attack "did not ultimately result in the loss of human life."
The punitive measures come after clashes have spread in east Jerusalem and the occupied West Bank in recent days following the deaths of four Israelis.
Israeli troops shot dead a Palestinian teenager on Monday -- the second killing in 24 hours -- as dozens were wounded in fresh clashes.
The spike in violence has brought international calls for calm, with concerns the unrest could spin out of control and memories of previous Palestinian uprisings -- so-called "intifada" -- still fresh.
In the wake of the violence, Netanyahu has announced a series of new security measures and right-wing politicians have urged the demolitions to be brought forward.
On Tuesday, Israel lifted rare restrictions barring Palestinians who were not residents of Jerusalem`s Old City, business owners or students from entering it, imposed for two days after two Israelis were stabbed to death there.
Worship at the sensitive Al-Aqsa mosque compound would continue to be limited to men aged 50 and above. There is no age limit for women.
Around 300,000 Palestinians live in Israeli-annexed east Jerusalem, where the Old City is located.
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