Shira Banki, 16, was one of six people attacked at the event on Thursday.
Yishai Schlissel, an ultra-Orthodox Jew, who carried out a similar attack in 2005, was arrested at the scene.
Israel's government would have "zero tolerance" for Jewish extremists, Prime Minister Benjamin Netanyahu said at a security cabinet meeting on Sunday.
His comments also followed a separate attack in which an 18-month old Palestinian child died when his West Bank home was firebombed by suspected Jewish settlers.
The cabinet approved new measures  to tackle ultra-nationalist violence against Palestinians, including detention without trial of Israelis.
The policy of detention without trial has long been used against Palestinians, but observers believe it has rarely been used against Israelis.
No arrests have been made so far in the case.
Hours after Shira Banki died, a vigil was held for her near the place she was stabbed, attended by  hundreds of mourners - among them school friends, teachers, members of the gay community and supporters.
Dramatic images of Thursday's attack in Jerusalem showed the suspect reaching inside his coat and raising a knife above his head.
He then began stabbing marchers while screaming, before being tackled by a police officer.
'We marched through blood'
The parade continued after the wounded were taken to hospital, with protesters chanting "end the violence".
Prime Minister Netanyahu condemned the attack as "a most serious incident".
The Gay Pride event has long been a source of tension between Jerusalem's secular majority and its Jewish Orthodox communities.
A teenage girl who was stabbed at a Gay Pride march in Jerusalem has died from her wounds, doctors say.