In the northern West Bank city's historic centre, the troops rigged a strong explosion which collapsed the empty building, witnesses and Israeli military sources said.
An Israeli military source also added the soldiers blew up explosives they found inside, as well as chemicals used to make bombs.
Two Israeli soldiers on Saturday were also hurt in local operations, including one slightly wounded in a blast in a nearby refugee camp.
Meanwhile, a soldier was caught in a blast in the nearby Balata refugee camp, but was not seriously injured, an Israeli military source said.
Another broke his leg after falling from a terrace in the Old City.
They also said Israeli troops had found their sixth cache of Palestinian weapons since they launched a large search operation in the Old City.
Crossing hours extended
In other developments, the Allenby crossing between the West Bank and Jordan will be open for 36 hours starting on Saturday, Palestinian and Israeli sources said, because of exceptionally high traffic.
About 10,000 people from both sides are expected to cross the border in the next several days, the director of the Palestinian terminal, Nazim Muhanan, told AFP.
The crossing is normally open for eight hours a day. They earlier reported finding two Qassam rockets, named after the military wing of the resistance Hamas movement, which were being manufactured in another building in the city.