The bulldozer, protected by a force of Israeli soldiers, demolished the park in Azzun, close to the northern town of Qalqilya on Wednesday, on the grounds that it had been built without permission of the Israeli authorities in the occupied territory.
Construction work on the park had begun in November and was almost completed, the mayor of Azzun, Ihsan Abd al-Latif, said.
He said that the project, which cost around $120,000, had been financed by the US Agency for International Development (USAid).
"I can confirm that the park that was destroyed today was funded by USAid," a spokeswoman for the agency, Anna-Maija Litvak, told AFP.
"I can confirm that the park that was destroyed today was funded by USAid"
The spokeswoman added that USAid had contributed around $80,000 towards the cost.
No immediate reaction was available from the Israeli army, which regularly demolishes buildings that it says have been constructed without authorisation.
The army also destroyed two houses built without permission in two other villages in the Qalqilya area on Wednesday, according to Palestinian security sources.
Also on Wednesday, a four-year-old Palestinian boy was seriously wounded when he was hit in the face by fragments of an Israeli shell in the Gaza Strip, medical sources and witnesses said.
Ismail Shueider was being treated in Gaza's Shifaa hospital after a shell hit an apartment block in the town of Bait Hanun which is situated close to an area which was recently declared a "no-go zone" by the Israeli military.
Shortly before the bombardment, Palestinian fighters had been seen firing makeshift rockets from northern Gaza into Israel. The firing was claimed by members of the Al-Aqsa Martyrs' Brigades, an armed offshoot of the mainstream Fatah faction.
Palestinians were detained
elsewhere in the West Bank
An army spokeswoman said that the report of a child being injured were being investigated.
"We are still looking into what exactly happened," she said.
Also in the occupied West Bank, six Palestinians, including three members of the newly elected Hamas movement, were arrested overnight by Israeli security services.
All six, which also included two members of the Islamic Jihad movement, had been on an Israeli wanted list, military sources said.
The army meanwhile said that the Karni terminal on the border between Israel and the Gaza Strip would remain closed after an explosion in the area on Tuesday night.
Soldiers were carrying out searches to determine the cause of the blast near the crossing which is the main transit point for merchandise.