An undercover unit stormed into a restaurant and shot dead 25-year-old Majid al-Saadi on Wednesday.
Locals said no attempt was made to arrest the man Israel accuses of belonging to the Islamic Jihad resistance movement.
A taxi driver in the restaurant at the time suffered gunshot wounds.
Israeli forces also arrested a number of others present at the time of the raid under suspicion of belonging to resistance groups.
Israel has taken hundreds of suspects into custody and killed dozens it says are behind various bombings and attacks in more than three years of conflict.
An Israeli military spokesman told Aljazeera.net that there was ample evidence of al-Saadi's guilt but it could not be produced for security reasons.
Two teenage Palestinian girls were arrested by Israeli occupation forces in the northern West Bank city of Nablus.
Israeli public radio alleged that Majda al-Kukhun and Asal Musa al-Hindi, 15-year-old classmates, were in fact "two wanted Fatah women".
Both girls were detained in their houses in the Rafidya quarter just after dawn, according to Palestinian Authority sources.
The fathers of the two girls were taken away with them, but with no explanation for their arrest.
Israeli public radio also asserted the two teenagers had been planning to carry out an attack in Israel.