The dead man was identified as Mahmud Abd al-Rahman Khalil, 28, who was a leading member of the al-Quds Brigades, the military wing of the Islamic Jihad.
According to Aljazeera's correspondent in Ram Allah, Khalil was shot dead by troops who raided the house where he was living in the village of Raba, close to the town of Jenin.
The soldiers, who arrived in 20 Jeeps, opened fire in his direction as he was giving himself up, Aljazeera correspondent, Shirin Abu Aqila reported.
An Israeli military spokesman confirmed the death of Hammad but gave a different version of events.
The soldiers who were surrounding a house "opened fire on a suspect who was fleeing, armed with a pistol", the spokesman said.
The latest death brought the overall toll since the September 2000 start of the Palestinian uprising to 4596, including 3560 Palestinians and 962 Israelis.