Arafat Yakoub was shot in the head on 6 June when soldiers opened fire on stone-throwing Palestinians near a checkpoint at Kalandiya refugee camp, north of Jerusalem, medics and witnesses said.
The army said troops shot at several Palestinians suspected of trying to infiltrate an Israeli industrial zone near the camp, first aiming for their lower bodies and then at a nearby building in an effort to drive them back.
"At that stage (soldiers) did not identify casualties on the Palestinian side," an army statement said on Thursday. "After the incident a complaint was received ... regarding a 31-year-old handicapped Palestinian who was killed as a result of Israeli fire."
"The platoon commander in charge of the unit that carried out the shooting was relieved of his command and the deputy company commander ended his commission prematurely. The company commander was given a reprimand," it said.
Residents of Kalandiya said Yakoub, 31, had been paralysed when soldiers shot him in a 1989 confrontation, and wounded again in a 2002 incident.
Yakoub, a father of three, was an accomplished wheelchair basketball player and also directed a rehabilitation centre in the camp.