About 18 military Jeeps backed by two helicopters pushed into the desert oasis town and arrested Sami Arkelan, a member of the Al-Aqsa Martyrs' Brigades.
His family said , Ziad Awazme, a nephew of Arkelan was also taken. It is not clear if Awazme belonged to the resistance group, which is an offshoot of the mainstream Fatah movement.
The Israeli army confirmed an arrest operation had taken place in the city, saying troops had arrested Arkelan.
A military source said: "We have been in touch several times with the Palestinian security forces about this man, but they did nothing about it, so we had to go in and do it."
There have been relatively few Israeli army operations in Jericho but soldiers recently pushed into the town on several occasions after 46 Palestinians were freed from jail on 9 February.
Seven of them belonged to the Al-Aqsa Martyrs Brigades.
Further north, two 18-year-old Palestinians were arrested after trying to throw molotov cocktails at troops guarding the Salem checkpoint near Jenin, the army and Palestinian security sources said.
Meanwhile, hundreds of Palestinians inside the Green Line have taken part in a rally to protest against Israeli plans to relocate Arabs from the Negev desert in southern Israel.
The Israeli government plans to move the inhabitants of 45 Arab villages Israel does not recognise. It seeks to group the villagers in cantons particularly established for this purpose.