Palestinian security officers said Ilwam Beniawdi, 25, was a member of the group's armed wing.
It was not immediately clear what had triggered the blast, they added.
No further details were immediately available.
Meanwhile, Israeli occupation forces have pulled out of a West Bank refugee camp after a devastating nine-day invasion.
The soldiers withdrew on Wednesday afternoon after killing two children and injuring dozens more during a massive military operation.
According to Palestinian witnesses, the invasion included road demolitions, damage to buildings, house-to-house searches and curfews.
The Israelis said they launched the attack to hunt down alleged "anti-Israeli militants".
Mattias Hagftrom, a peace activist from the International Solidarity Movement, said the Israelis had devastated daily life in the overcrowded camp.
"I personally witnessed Israeli soldiers smashing the interior of houses. I even saw soldiers stealing one man's hajj money, and taking jewellery and a mobile phone from women"
International Solidarity Movement
"There were clashes here every day. The Palestinians were throwing stones and the Israelis seemed to be shooting at anything that moved, especially after dark," he said.
"The soldiers also imposed a curfew and that upset many people because it forced them to stay at home and was very dangerous for children who were coming back from school."
He added that he did not believe Israeli justifications for the invasion.
"They say they were looking for 'wanted men', but I don't believe that. I can't say for sure, but I don't think there are any fighters here in Balata. There are no guns here - it's not like nearby Nablus."
And fellow peace activist Goan Anderson accused Israeli soldiers of behaving "disgracefully" by conducting over-agressive searches and assaulting men.
"I personally witnessed Israeli soldiers smashing the interior of houses," he said. "I even saw soldiers stealing one man's hajj money, and taking jewellery and a mobile phone from women. I don't think this was on the orders of the commanders - it was just individual soldiers trying to benefit from the situation.
"We tried to talk to them but they weren't listening to us. They then sprayed tear gas and four children had to go to hospital, and one of our international volunteers was hospitalised as well because of lung pains."
Aljazeera attempted to contact The Israeli Defence Force to respond to the allegations, but no one was available to comment.
However, in the past few days the IDF said it launched the invasion to capture known "terrorists", and that any innocent casualties were not intentionally targeted.
Balata is home to an estimated 20,000 refugees who were displaced, following the creation of Israel in 1948.
The Israelis were accused of
firing randomly at residents
Two children killed
The Israeli pull-out came days after two children were killed by occupation troops in the besieged camp.
Aljazeera correspondents reported that a five-year-old boy was killed on Sunday when Israeli soldiers opened fire.
Muhammad Naim Tasrida was shot in the chest while playing near his house.
Another boy, Nur Imran, died on Monday from injuries he received when he was hit in the head by a rubber bullet, fired by the Israeli military.
West Bank invasions
Moreover, Israeli military action was reported in other West Bank towns on Wednesday.
According to Aljazeera's correspondent in Jenin, a father of four was shot in the head by Israeli soldiers, who randomly opened fire at residents in Jab'a.
The town, near Jenin, was attacked by Israeli forces who again claimed they were looking for "wanted activists".
At the same time, occupation forces, backed by 15 military vehicles, raided the town of Qabatya and sealed it off.
According to Aljazeera's correspondent there, the forces randomly opened fire and surrounded the house of Yasir Nazzal, purported to be a leader within al-Aqsa Martyrs Brigades resistance group.
And in Tulkaram, an Israeli soldier was injured in clashes with Palestinian resistance fighters.
About 30 military vehicles raided the town's refugee camp early on Wednesday. The forces later withdrew, following heavy resistance.
The Israeli army earlier announced a halt to a massive invasion in the southern Gaza Strip refugee camp of Rafah.
Israeli PM Sharon says soldiers
are hunting down ''terrorists''
Ten Palestinians were killed and 42 injured in the invasion which began at dawn on Tuesday.
Confirming that the invasion has been halted for now, Aljazeera correspondent Khalid Amayrah said the military action was part of ongoing attempts to "terrorise the local population".
Amayrah reported that the mayor of Rafah, Muhammad Agha, described the onslaught as a "massacre".
The mayor added "the Israeli soldiers were acting like Nazis, they have become like the Nazis, they were acting like the Gestapo".
Agha appealed for international intervention "to put a stop to the carnage".