Five other Palestinians were injured in an Israeli air strike on Gaza City on Tuesday.
Israeli helicopters fired four missiles at the roof of a building in the refugee camp in Nablus where two fighters were positioned, Aljazeera's correspondent reported.
At the same time, ground forces shot at them.
Hani Hashash, 20, and Ibrahim Siba, 25, leading members of al-Aqsa Martyrs Brigades in Nablus, were killed and two Israeli soldiers were slightly injured, he added.
The al-Aqsa Martyrs Brigades is an armed wing of the Fatah faction headed by Mahmoud Abbas, the Palestinian president.
Clashes also erupted in al-Quraan and al-Hashasheen neighbourhoods in the camp in the West Bank city.
The two men were on Israel's "most wanted" list, Aljazeera's correspondent said.
An Israeli military spokeswoman had no immediate comment.
Israel radio described the force raiding Balata as paramilitary police.
In the al-Shijaiya area of eastern Gaza, an Israeli reconnaissance plane fired a missile at a group of Palestinian fighters, injuring five.
Two of the injured were in a critical condition, Aljazeera's correspondent in Gaza City said.