The incident, which marked the first time Israeli Jews had been shot at with live bullets since the start of the Intifada more than three years ago, dominated coverage of Israeli newspapers and radio phone-ins.
Another activist, an American woman, was also shot and injured in the incident.
The Israeli Defence Forces have already launched an inquiry into the shooting on Friday which left Gil Naamati, a member of the "Anarchists Against the Wall" movement, with serious leg injuries.
Left-wing deputies and commentators lined up to denounce the "scandal", while their opponents on the right defended the soldiers and accused protesters of abetting "terrorism".
One of Naamati's fellow demonstrators, Ori Allon, told AFP they had shouted out to the soldiers during the protest near the town of Qalqilya they were Israelis, as weapons were aimed at them.
"I did not think they would really open fire," he added.
Minister without Portfolio Uzi Landau, who is close to Prime Minister Ariel Sharon, had little sympathy for the demonstrators.
"Anyone who carries out an attack on the security fence is collaborating with terrorism and paving the way for suicide bombers," said Landau.
Deputy defence minister Zeev Boim also defended the decision to open fire and called for the prosecution of Gil Naamati and an American who was also injured by the gunfire.
Some Israeli commentators say
IDF sees Palestinian life as cheap
"The group of demonstrators operated in a closed military zone, in violation of the OC Central Command's order, and with a desire to create a provocation and to damage the fence," said Boim.
The left, however, argued that the army would never have dreamed of opening fire on settlers if they refused to obey orders to evacuate their homes in the West Bank and Gaza Strip.
Avshalom Vilan, an MP with the left-wing Meretz party, demanded the army should "reveal the name of the officer who gave the illegal order to open fire against the protesters" in order that he could face disciplinary action.
"Cheapening" of Palestinian life
Others said the incident was evidence of a general "cheapening" of life after the death of more than 3600 Palestinians and Israelis during the course of the Intifada, pointing out little fuss would have been made if the victim was Palestinian.
"For a number of years now, the fingers of IDF troops have been light, too light, on the trigger when dealing with Palestinians," the renowned novelist David Grossman told the Yediot Aharonot daily.
"Those who have been made accustomed to think of human life as cheap, start with Palestinians and end with members of their own people"
"Those who have been made accustomed to think of human life as cheap, start with Palestinians and end with members of their own people.
"Maybe we will begin to wake up and understand to what depths the occupation, the internal hatred, the violence that erupts from within our midst even against ourselves, has taken us."
Despite an international chorus of criticism against the barrier, which the US administration calls a "problem" as it juts deep inside the West Bank, Israel says it is needed to prevent Palestinian assailants from infiltrating its territory.
Palestinians say the barrier, which is earmarked for completion in 2005, is little more than an attempt to pre-empt the borders of a future two-state settlement.