Shaikh Bassam al-Sadi, a regional head of the Islamic Jihad group, was held early on Wednesday when dozens of Israeli soldiers backed by tanks and helicopters swooped upon the main Palestinian refugee camp in Jenin, said our correspondent.
Occupation troops surrounded a house near Shaikh Abd Allah Azzam mosque and evacuated residents from the area with the help of dogs. One child was reportedly bitten and taken to hospital.
The troops fired some shots, residents said, but there was no return of fire.
Witnesses said the Israelis used sniffer dogs to find where al-Sadi was hiding. Soldiers then seized the 45-year-old, al-Sadi and beat him before taking him away, they added.
Thirteen other Palestinians were also arrested in Jenin, they said.
Israeli soldiers also shot dead two Palestinians during an invasion of the West Bank refugee camp of Tulkaram.
Palestinian medical sources said one person killed was a member of the Islamic Jihad group.
At least three other civilians were injured during the raid.
In other Israeli military raids, troops seized several suspected resistance fighters near the West Bank towns of Nablus, Ram Allah and Hebron, agencies reported.
The Jenin raid prompted some young Palestinians to throw stones and bottles at Israeli soldiers and the town remains tense, with locals angered by the morning's events.
The arrests come just one day after the occupation forces lifted a curfew on the restive West Bank town.
The Islamic Jihad has been one of the most active armed groups fighting the Israeli occupation, and al-Sadi has been wanted by Israel for at least two years.
His two sons and mother were killed during the current al-Aqsa Intifada.
Elsewhere, witnesses in the southern Gaza Strip said soldiers blew up 12 homes and a tunnel used to smuggle weapons from Egypt into the Palestinian enclave.