One Israeli occupation soldier died and four more were also wounded when they tried to kill Muhammad al-Hanbali, the chief commander of Hamas for the north West Bank, on Friday.
According to Palestinian security officials, the Israeli troops fired four missiles at a seven-storey apartment building where the resistance fighter was holding out.
Al-Hanbali, 27, put up heavy resistance and threw hand grenades but was killed when the Israelis blew up the building.
Twenty eight Palestinian families were rendered homeless by the destruction of the building.
Earlier on Friday, a column of 20 jeeps and armoured personnel carriers surrounded the area in the northern part of Nablus.
Witnesses reported four loud explosions were heard after the troops moved into the area in the Al-Mahsiah neighbourhood.
Arafat and Abbas are reportedly
Israel has stepped up attacks in West Bank towns since the collapse of an interim ceasefire between Israel and Palestinian resistance groups.
Meanwhile, leading members of the Palestinian Fatah movement are attempting to arrange a meeting between President Yasir Arafat and Prime Minister Mahmud Abbas.
The two top Palestinian officials are reportedly at loggerheads with each other.
Our correspondent reported Arafat and Abbas have not held any serious discussions with each other for the past 10 days.
This has worried sections in the Palestinian Authority which is dominated by Arafat's Fatah movement.
The differences revolve around control over the Palestinian security apparatus which Arafat is reluctant to hand over to the unelected Abbas.
A high-ranking Egyptian delegation is likely to visit Ram Allah in the next few days to sort out their differences, our correspondent said.