Arshad Abu Zeid, 21, and Jihad Zahaneh, 22, were killed in a shootout with Israeli troops late on Sunday in Kabatiya, the home town of the Islamic Jihad bomber who killed five Israelis in an attack last Wednesday.
The two men were wanted in connection with what was the first deadly bombing since Israel withdrew from the Gaza Strip last month.
Thousands of mourners marched behind a funeral cortege on Monday in the northern West Bank city of Jenin before the procession wound its way to their family homes and their final resting place in Kabatiya.
Dozens of masked armed men from the Islamic Jihad's armed wing, the al-Quds Brigades, fired volleys of bullets into the air and called for the killings to be avenged.
Victim still alive
Eight Palestinians were injured in Sunday's Israeli army raid, but paramedics insisted that a third armed man, who the Israeli military said was shot dead in a separate incident in Kabatiya, was still alive.
At least 11 Palestinians have been
killed since the Hadera blast
Palestinian paramedics said Mohammed Assaf Kmail, who was admitted to hospital in Nablus, was critically wounded after a shootout when an army patrol spotted three armed men placing a bomb in Kabatiya.
Israeli military sources said the army had been informed by Palestinian sources that the armed man was dead.
At least 11 Palestinians have been killed in Israeli army operations and air strikes since the bombing in the northern Israeli town of Hadera.
Eight Palestinians were arrested overnight in the West Bank and a Hamas member was detained in an undercover operation on Monday, sources on both sides said.
Israel's pullout from Gaza had raised hopes in the international community of a breakthrough in the peace process but such optimism has steadily crumbled amid persistent violence.
"If the Palestinian Authority continues to do nothing about terrorism, we will"
Aide to Israeli Prime Minister Ariel Sharon
A senior official told AFP that Israel would continue to take action against fighters as long as the Palestinian Authority failed to act.
"If the Palestinian Authority continues to do nothing about terrorism, we will," an aide to Prime Minister Ariel Sharon said.
"We are waiting for the Palestinians to decide to dismantle terrorist organisations before renewing contacts at the leadership level and moving forward."
The Palestinian Authority, however, condemned the killings, which came shortly after an Islamic Jihad official in the Gaza Strip said the group would abide by an informal truce after a deadly week of violence.
"This Israeli terrorist operation against our people will not help bring security and quiet ... and threatens the quiet understanding which the Palestinian leadership and people want to protect," the Interior Ministry said.
Islamic Jihad said it is willing
to abide by an informal truce
Ministry spokesman Tawfiq Abu Khussa said that Palestinian security forces were working daily to stop rocket attacks but that "continued Israeli attacks are complicating the situation".
Abu Khussa accused Israel of refusing to end the cycle of violence because it is reluctant to restart the political process.
An Islamic Jihad official in the Gaza Strip, Mohammed Harzin, accused Israel of "having violated the truce anew".
The head of an umbrella grouping of factions on Sunday announced that all groups had decided to return to a de facto truce and urged the international community to stop Israeli aggression.
An Israeli official said any declaration of a ceasefire by fighters was "an agreement that does not concern Israel" and a "domestic Palestinian matter".
The Gulf Cooperation Council (GCC) called on the world community on Monday to step in to halt what it termed Israel's "ongoing aggression" against the Palestinians.
A statement issued by the GCC's secretariat urged "the international community, the quartet and the UN Security Council to shoulder their responsibilities and intervene immediately to halt the ongoing Israeli aggression against the Palestinian people."
The GCC called for international
help in halting Israeli aggression
The quartet refers to the European Union, Russia, the United Nations and the United States, authors of a peace "roadmap" which has made next to no progress since its launch in 2003.
The GCC, whose secretariat is based in Riyadh, groups Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.