Witnesses identified the activist on Friday as Ahmad al-Abad, a member of al-Aqsa Martyrs Brigades, the armed wing of Palestinian President Yasir Arafat's Fatah faction.
A Palestinian policeman at the scene said there were explosives in the vehicle. It exploded about 500 metres from an Israeli occupation military checkpoint.
Earlier, Israeli soldiers killed two Palestinian activists dressed in wetsuits, who apparently tried to infiltrate an occupied Gaza Strip Jewish settlement from the coast.
Hamas military wing, the Izz al-Din al-Qassam Brigades, said on Friday that two of its fighters carried out a "unique naval operation" and died after fighting Israeli forces.
Israeli military sources initially said that three Palestinians were killed shortly before midnight on Thursday. After searching the area in daylight, occupation officials said two bodies were found near the Tal Katifa settlement.
Under international law, all Jewish settlements are illegal, a stance not recognised by Israel.
The two Palestinians were accused of opening fire on an army outpost guarding the settlement. They were wearing diving uniforms and flippers were found thrown on the coast, the army said. They were allegedly armed with assault rifles and rocket-propelled grenades, said occupation forces.
Tensions, especially in the Gaza Strip, have increased significantly since Israel assassinated Hamas spiritual leader and founder Shaikh Ahmad Yasin on Monday.
The resistance group has vowed to retaliate.
Also on Friday, more than 15 Israeli military vehicles invaded the occupied West Bank town of Qabatya, south of Jenin.
Israeli occupation soldiers have detained at least seven Palestinians, claiming they are resistance activists, reported Aljazeera.