They said 58-year-old Ahmad Khalil was shot in the head on Saturday by a group of four settlers who drove past as he was walking near Deir Nidham village, 10km northwest of Ram Allah.
A second Palestinian was wounded in the shooting but his condition was not immediately clear, they said.
Other Palestinian security officials, however, said there was some confusion over the source of the shooting as Israeli soldiers had been operating in the area at the time.
Israeli military sources confirmed that troops in the same area had fired towards two Palestinians who were suspected of planting a roadside bomb and had identified a hit. They did not know the condition of the wounded man.
The death brings the overall toll since the September 2000 outbreak of the second Palestinian uprising, or intifada, to 4851, according to an AFP count.
Earlier on Saturday, powerful Palestinian cabinet minister Mohammed Dahlan returned to the Gaza Strip after a month's treatment in a Belgrade hospital for a back complaint, officials told AFP.
The civil affairs minister had been absent during a crucial period in Palestinian politics following Israel's landmark withdrawal from Gaza.
Cabinet minister Mohammed
Dahlan returns from Belgrade
He had been in charge of efforts to coordinate the pullout,
which was completed on 12 September, and his absence since then had fuelled speculation about his future.
Dahlan told AFP last week that he would stop working 18-hour days when he returned but was not about to quit frontline politics.
"I will make it less of a priority, but I am not going to quit politics," he said. "This is in my blood."
Elsewhere, Israeli occupation soldiers shot and killed two Palestinians in a confrontation in the West Bank, sources say.
Palestinian security officials said that one unarmed Palestinian was found dead in Tulkarim after a stone-throwing protest against Israeli forces and that Israel later informed them that
its troops had recovered another body, not yet identified.