Hannah Bladon, 20, was stabbed to death on April 14, 2017, by Jamil Tamimi, a Palestinian resident of east Jerusalem aged 57 at the time.
Bladon, a student at Britain's University of Birmingham, was in Jerusalem on a semester-long exchange programme at the Hebrew University.
She had been riding a tram close to the Old City when she was stabbed by Tamimi seven times.
Tamimi, who was convicted on December 31 and sentenced on Thursday in a plea bargain, had been released from a mental health institution the previous day.
He was furious his children refused his request to stay with them and "resolved to stab someone to death with a knife" he had bought, the ruling said.
Tamimi was diagnosed as suffering from schizophrenia but fit to stand trial and accountable for his actions - but possibly to a slightly lesser degree, according to the doctors who examined him.
He was convicted of murder, with the 18-year prison term constituting a "lesser sentence", the ruling said.
The court noted Tamimi had been sentenced to 10 years in prison in 2000 for committing a sexual crime against a minor in his family.