The body of Jihad Mustafa Asaad, 32, shot five times, was found in a room in the Ain al-Hilwah refugee camp on the outskirts of the Lebanese port city of Sidon on Saturday, the Palestinian officials said, speaking on condition of anonymity.
The motive for the killing was not immediately known.
Palestinian officials in the camp said Asaad had quit the Fatah group some time ago.
Ain al-Hilwah has been the scene of frequent bombings, assassinations and shootings involving rival Palestinian factions - mainly Arafat's Fatah and other resistance groups - vying for control in the camp.
It is believed to be home for many Palestinians wanted by Lebanese authorities. Lebanese troops man checkpoints outside the camp, but do not enter.
Ain al-Hilwah is home to about 75,000 Palestinians, those who were displaced in the 1948-49 war that led to the creation of Israel, and their descendants.
It is the largest of 12 Palestinian refugee camps in Lebanon, where about 350,000 Palestinian refugees live.