Amer Basyuni, 15, was shot in the neck while standing on the roof of his home when soldiers opened fire during the raid on the Ein Beit Elma camp in Nablus on Friday, witnesses said.
They say he had gone up on the roof to see what was going on.
A second Palestinian, 18, was wounded by Israeli gunfire.
An Israeli army spokesman told AFP that "our soldiers were conducting an arrest operation in Nablus. They saw an armed man on a roof, opened fire against him and identified a hit".
The source said troops shot a second person who threw an object, believed to have been a bomb, at the soldiers during the raid.
Residents said Basyuni was not armed.
Basyuni's death brings to 4971 the number of people killed since the outbreak of the Palestinian uprising in 2000.
Over three-quarters of the victims have been Palestinian.
Palestinians carry the body of
Amer Basyuni during funeral
Israeli troops arrested three Palestinians, including two suspected members of the Islamic Jihad and al-Aqsa Martyrs Brigades factions, in the northern West Bank town of Tulkarem, security sources said.
A fourth Palestinian was lightly wounded during the raid.
Elsewhere, an army spokesman said four people had been arrested in southern Israel after being suspected of infiltrating the Egyptian border.
Israel began a series of raids against Palestinian fighters in the northern West Bank after Hamas group won the 25 January Palestinian parliament elections.
Israel has also worked to internationally isolate Hamas in an effort to force the group to renounce violence and recognise Israel's right to exist.
Several countries have ignored the Israeli efforts and invited Hamas leaders for visits even though the group has refused to change its ideology.