The incident on Monday came just a day after Palestinians marked the anniversary of al-Nakba (catastrophe) of 1948 when thousands were forced from their homes and into exile.
Also on Monday, the Israelis announced they would start the construction of a new segment of the separation wall in the West Bank in two weeks.
Israeli military officials said the Palestinian man tried to stab a soldier with a knife at an army checkpoint near the West Bank town of Tulkaram, and that troops opened fire when he ignored warning shots and orders to stop. The account could not be independently verified.
His death raised to 4757 the number of people killed since the Palestinian uprising, the al-Aqsa intifada - which erupted in September 2000 against Israeli occupation - including 3695 Palestinians and 988 Israelis.
Meanwhile, Israel is set to start construction of a segment of its illegal barrier that will encircle the West Bank's largest settlement and expand Jerusalem's boundaries.
Israeli officials said on Monday the construction was to begin in two weeks, and would place the Maaleh Adumim settlement with more than 30,000 residents on the "Israeli side" of the boundary.
Palestinians say the Israeli wall
is an attempted land grab
Israel is already building sections of the barrier elsewhere on the outskirts of Jerusalem.
Once the barrier rings the entire city, it would cut off eastern Jerusalem, the Palestinians' future capital, from its West Bank hinterland.
The US is opposed to the construction, and US President George Bush had raised the issue during an April news conference with Israeli Prime Minister Ariel Sharon.
The housing plan runs counter to Israel's commitments under the US-backed road map peace plan, which calls for a freeze in settlement construction.
Monday's developments came a day after millions of Palestinians at home and in the diaspora commemorated the 57th anniversary of the Nakba (catastrophe).
Palestinians observed the blackest day in their history with warnings that there would be no Middle East peace until they got independence, and the plight of their refugees was resolved.