An Israeli military spokesman said troops on an arrest raid had opened fire at fighters in the West Bank city of Nablus on Wednesday.
Aljazeera's correspondent in Nablus said a group of Palestinians threw stones at Israeli forces, who responded with rubber bullets.
Wail Tannus, an Aljazeera broadcast technician, was shot in the legs. He was transferred to a hospital and is in a stable condition, the correspondent said.
Palestinian witnesses said troops backed by armoured vehicles had surrounded a compound in Nablus where fighters were hiding.
Medics said three were killed in the shootout. They were members of al-Aqsa Martyrs Brigades, an armed wing of the Fatah movement headed by Mahmoud Abbas, the Palestinian president.
Two more Palestinians were killed later on Wednesday as the Nablus operation continued.
Witnesses and security officials said army bulldozers demolished a prison, and at least seven other buildings housing offices of different security branches, including military intelligence and national security forces.
Israeli troops also raided the central Gaza Strip on Wednesday as part of a three-week-old offensive to get back a captured soldier there.
Heavy shooting broke out around the Maghazi refugee camp in the central Gaza strip as Israeli troops and tanks crossed the border into the territory before dawn.
More than 70 people were injured
in attacks on Gaza
Fighting broke out and five fighters were killed, Palestinians said. Another was killed in an air strike on the camp, hospital officials said.
Late on Wednesday, violence continued in the camp as aircraft opened fire on a group of 20 gunmen, the army said. One person was killed 20 others were injured, hospital officials said.
A second air strike on another group wounded five people, two critically, hospital officials said.
An Israeli army spokesman said five Israeli soldiers were wounded, two seriously.
More than 70 Palestinians were reportedly wounded in the raid.
The camp, with 22,000 residents, is near the Gaza-Israel fence and across from the Palestinian town of Dir al-Balah.
Israel began a large-scale operation in Gaza on June 28 three days after Hamas-linked fighters tunnelled under the border and attacked an Israeli army base at a Gaza crossing, killing two soldiers and capturing a third.
About 100 Palestinians, almost half of them civilians, have been killed by Israel since.