The attack took place early on Thursday morning during an extensive incursion into Gaza.
A column of Israeli tanks and armoured vehicles entered the refugee camp under the cover of darkness, residents and witnesses said. Helicopters fired at least two missiles into the camp.
Muhammad al-Haj Ali, 18, was killed after being shot in the chest by Israeli troops.
Palestinian security officials said Alhadjali was an activist of the Palestinian resistance group Hamas. Seven others were wounded.
The death brings to 4294 the number of people killed since the beginning of the intifada at the end of September 2000, according to an unofficial toll compiled by AFP.
The dead include 3280 Palestinians and 943 Israelis.
Condemning the invasion, Palestinian Negotiations Minister Saib Uraiqat said "while Israel speaks about disengagement, its army occupies large parts of the Gaza Strip ... turning it into a big prison".
Expulsion idea revisited
In other developments, for the second time in a week an Israeli official spoke openly about expelling Palestinian leader Yasir Arafat.
Israeli officials continue to talk
about expelling Yasir Arafat
The expulsion of Arafat is "closer than ever", said Israel's Foreign Minister Silvan Shalom on Wednesday.
Speaking to hardline supporters from his Likud Party, Shalom called Arafat a terrorist and said he had no place in the region. The remarks were broadcast early on Thursday on Israel Radio.
On Monday, Defence Minister Shaul Mofaz said the government remained committed to a security cabinet decision from last year to remove Arafat, but there were no immediate plans to take action.
Persona non grata
"Arafat has no place among us and the day will come when we will remove him from this land to a different place and this day is closer than ever," Shalom said.
Arafat has been confined to his battered headquarters in the West Bank city of Ram Allah for more than two years.
Israel has repeatedly threatened to expel the veteran Palestinian leader. But the United States has been vehemently opposed to removing Arafat in the past, and Prime Minister Ariel Sharon reportedly pledged not to push forward with such plans.