Aljazeera's bureau chief in Palestine, Walid al-Umari, reported that Palestinian residents of Anata reacted with anger and disdain after the two homes were razed on Wednesday, leaving some 18 people, mostly children, without shelter.
Israeli sources said the two homes were unlicensed and therefore had to be torn down.
Elsewhere, five Palestinians where injured when Israeli occupation troops opened fire with rubber bullets and tear gas in the Palestinian town of Surif, outside Hebron.
One of the Palestinians was listed in critical condition by medical sources.
The Israeli army also reported that two of its soldiers were injured when they were attacked by stone-throwing Palestinian youths.
According to data compiled by the Israeli human-rights group B'tselem, some 675 Palestinian homes have been demolished in the past four years, including 216 homes torn down in Jerusalem and surrounding areas.
Past home demolitions wreaked
havoc on Palestinian families
In February, Israeli Defence Minister Shaul Mofaz decided to accept the recommendation of army Chief of Staff Lieutenant-General Moshe Yaalon to "stop exercising the legal right to demolish terrorists' houses as a means of deterrence".
An Israeli army review found that the punitive measure of home demolitions did little but inflame anger and hatred for the Jewish state.
In related news, a resolution calling for an investigation into Israeli use of Caterpillar equipment to demolish Palestinian homes was voted down by Caterpillar Inc shareholders at their annual meeting in Chicago on Wednesday.
The resolution was defeated by a vote of 97% against and only 3% in favour.
It was introduced by four Roman Catholic orders of nuns and the group Jewish Voice for Peace, who argued that the sale of company equipment for such purposes violated Caterpillar's code of business conduct.
"Caterpillar's sale of weaponised bulldozers to the Israeli military is tantamount to selling a gun to a person you know is planning to kill someone"
Jewish Voice for Peace
"Caterpillar's sale of weaponised bulldozers to the Israeli military is tantamount to selling a gun to a person you know is planning to kill someone," Liat Weingart, co-director of Jewish Voice for Peace, said.
"Though Caterpillar is not actually behind the wheel, they are providing the machinery as well as training and support for the Israeli military to harm civilians."
Other Jewish organisations had opposed the resolution as unfairly singling out Israel for economic pressure without holding Palestinians accountable for acts contributing to unrest in the region.
Caterpillar's board of directors urged defeat of the resolution, saying the Peoria, Illinois-based company has "neither the legal right nor the means to police individual use" of its equipment.