The 16-year-old was killed on Wednesday as he tried to plant a Palestinian flag on a mound of earth, Palestinian witnesses said. Five other Palestinians were wounded.
Military officials said Israeli forces fired a warning shot which hit a youth after Palestinians began throwing stones at the entrance to Bait Hanun.
Israel's invasion of the town entered its second day on Wednesday as Israeli bulldozers moved into the town.
In other developments, al-Aqsa Martyrs Brigade and Izz al-Din al-Qassam Brigades claimed joint responsibility for the explosive device that hit an Israeli troop carrier and its crew on the Egyptian borders with Gaza.
"The operation comes in retaliation to the assassination of Palestinian resistance leaders by the Israel occupation force particularly in Nablus," the statement read without giving any indication of casualties.