Elsewhere in the West Bank, Israeli occupation forces have conducted more raids, imposed fresh curfews and arrested dozens of people.
And a once prominent Palestinian resistance group has elected a new leader to replace its veteran commander who died recently in US custody.
Hundreds of uniformed Palestinian police took part in Saturday's march – alongside about 500 armed members of al-Aqsa Martyrs' Brigades, an offshoot of Palestinian leader Yasir Arafat's mainstream Fatah movement.
Demonstrators waved numerous pictures of Arafat and Shaikh Ahmad Yasin, the wheelchair-bound founder of the Hamas movement who was assassinated by Israel earlier this month.
"We are stronger than we were two years ago and we are going to hit the enemy harder than ever," a speaker from al-Aqsa Martrys' Brigades told the crowds.
Protesters hold posters of Shaikh
Yasin (R) killed by Israel in March
About 53 Palestinians and 23 Israeli occupation soldiers were killed during heavy fighting in the Jenin camp in April 2002, when occupation troops swarmed into the West Bank to crush resistance fighters opposing Israel's 37-year old occupation of the West Bank and Gaza Strip.
The march came hours after a Palestinian fighter infiltrated an illegal Jewish settlement in the West Bank, killing a settler before soldiers shot him dead.
Local boys prepare to stone an
Israeli tank in Nablus
The resistance group Hamas claimed responsibility for the attack, saying it was done to "avenge the assassination" of Yasin by an Israeli helicopter strike on 22 March in Gaza.
After the settlement attack, Israeli occupation troops in more than 80 vehicles invaded Nablus, imposing a curfew and arresting dozens of people, including two journalists in door-to-door searches.
Aljazeera's correspondent said soldiers set up a checkpoint at the Uthman mosque, dividing the city into two and preventing its residents from moving around.
The exact number detained could not be confirmed owing to restricted access to the city. But the correspondent said a journalist working for al-Quds newspaper and another with a local television channel were among the arrested.
Elsewhere, Israeli troops demolished two Palestinian houses in the southern Gaza Strip on Saturday as the army wrapped up a two-day invasion of the border town of Rafah.
Rafah residents have seen many
of their homes destroyed
On Saturday afternoon, the troops rigged the house with explosives and demolished it, but the strength of the explosive also destroyed a three-storey structure next door.
Three other houses also sustained damage in the blast, he added.
The demolition sparked a renewal of fierce clashes with
Palestinian fighters in the area, and heavy machinegun fire was seen coming from an Israeli helicopter flying over the area, the correspondent said.
New PLF leader
Meanwhile, the Palestinian Liberation Front elected a new leader to succeed Muhammad Abbas, who died in US military custody in Iraq last month.
The group issued a statement in Lebanon saying its central committee unanimously elected PLF deputy commander Umar Shibli, also known as Abu Ahmad Halab, to replace Abbas. It gave no further details.
A PLF spokesman at the Ain al-Hilwah camp near Sidon in southern Lebanon said the committee had elected Shibli at its meeting in the West Bank city of Ram Allah two days earlier.
Shibli's predecessor, commonly known as Abu Abbas, was captured by US-led forces in Baghdad last April and died on 10 March this year, officially of natural causes. The PLF has accused the Americans of assassinating him.