Ibrahim Saidi, 19, was fatally wounded in the abdomen after troops opened fire on Thursday towards a group of youths who were throwing stones in the Balata refugee camp, which adjoins the city of Nablus, medics and witnesses said.
Four other Palestinians were wounded by Israeli gunfire, the sources added.
An Israeli military spokesman confirmed that "an arrest activity" was ongoing in the refugee camp but gave no further details.
The latest death brings the overall toll since the September 2000 start of the intifada to 4961, according to an AFP count.
More than 30 Israeli army Jeeps and four bulldozers were involved in the incursion.
The Israeli army imposed a curfew in the camp and blocked all the entrances while soldiers took position on surrounding buildings, according to Palestinian security sources.
Three Palestinians have been killed and around 300 injured in a vast operation by the Israeli army in Nablus which started on Sunday.
Meanwhile, in the central West Bank a group of Palestinian villagers were involved in skirmishes with Israeli troops during a protest against building work on the separation barrier being built across the occupied territory.
The troops at one stage fired live ammunition into the air in a bid to disperse a group of around 60 villagers who were trying to prevent two bulldozers from operating in the village of Bait Sira, close to Ram Allah.