Asaad Salah Khaliliyah, a member of the al-Aqsa Martyrs Brigades, was shot in the head by what witnesses described as undercover troops firing at him from a car.
But Aljazeera's correspondent in Jenin reported an Israeli special force kidnapped the 32-year old on Thursday before killing him.
"The special force entered the city using a car with a Palestinian license plate," he said. "It kidnapped Khaliliyah, assassinated him and threw his body near civil defence headquarters in the city."
An Israeli military source confirmed the killing, but said a wanted "militant" was shot and killed after trying to flee paramilitary border police who went to arrest him.
According to Israeli newspaper reports, the assassination was carried out by the Israeli Defence Force's "Mistaaravim" unit, which uses troops disguised as Arabs.
Al-Aqsa, which has links with President Yasir Arafat's Fatah, is blamed by Israel for dozens of attacks on Israelis in the last few years.
"The special force entered the city using a car with a Palestinian license plate. It kidnapped Khaliliyah, assassinated him and threw his body near civil defence headquarters in the city"
Aljazeera's correspondent in Jenin
Meanwhile, Israeli troops have killed a 46-year old man who was shutting his window in his home in Rafah.
Witnesses said that troops guarding the Jewish settlement of Rafiah Yam fired into the neighbouring Palestinian refugee camp and killed Ibrahim al-Kird.
The Israeli army said it was investigating the incident.
The killings came as a new report by Israel's Shin Beth security service showed the number of Israelis killed in Palestinian attacks last year more than halved compared to 2002.
Shin Beth report
A total of 213 people were killed in 2003, including 50 soldiers and policemen, in attacks on "Israeli targets", compared with 451 in 2002, the report said.
But the relative downturn in violence has failed to translate into movement in the peace process, with top-level contacts between the Israelis and Palestinians frozen for nearly five months.
Israeli Prime Minister Ariel Sharon was also under pressure on Thursday from his powerful finance minister and the UN's Mideast envoy to open talks with Syria.
With the internationally-drafted peace roadmap in tatters, Netanyahu urged Sharon to go back on his refusal to resume peace negotiations with Syria.
"Bearing in mind Syria's very precarious position, it's in our interest to exploit recent overtures for contacts" with Syria, the influential former premier said.
He explained that US pressure on Damascus provided an unprecedented chance to reach agreement "without withdrawing from the Golan" Heights, occupied by Israel in 1967.
Syrian President Bashar al-Assad called on the United States last month to support renewed negotiations with Israel to normalise the two neighbours' ties and defuse the volatile situation on Israel's northern border.
The Golan Heights were annexed
by Israel in 1981
Netanyahu received backing on Thursday from Foreign Minister Silvan Shalom, who said Israel should not give the cold shoulder to Assad's offer.
"There is a need to examine Syria's intentions seriously, but this is a long way from saying in advance that we are ready for this or that withdrawal. We have to go (to the negotiations) without preconditions.
"I believe that in this way we can achieve peace," Shalom said.
The United Nations' coordinator for the Middle East, Terje Roed-Larsen, also urged Israel to accept Syria's offer to reopen peace talks, saying it was in the country's best interests.
"It is in the interest of the Israeli government to return directly to the negotiating table," Roed-Larsen told the London-based Arab newspaper Al-Hayat.
Sharon is reportedly awaiting Washington's opinion on the seriousness of Syria's proposal.