An Israeli ministry official said troops suspected the man was part of a group trying to infiltrate into Israel or plant landmines against Israeli forces in the border area.
Palestinian security sources, however, said Karim al-Kafarna, 28, was killed as he engaged in his hobby of bird-catching. The sources said al-Kafarna was carrying nets and related tools when he was killed.
The Israeli official said troops shot the man shortly after dawn when he was spotted with four other people in an area off-limits to Palestinians about 150m from the
fence that divides the Gaza Strip from Israel.
He said soldiers called for the men to stop and when they failed to do so fired warning shots before shooting at the group. One man was killed, another wounded and the others were arrested and were being questioned, he said.
The incident occurred near Kibbutz Nahal Oz, where Palestinians planted an anti-tank mine earlier this month and tried to carry out a bombing last week.