Hussamah Saleh, 23, was a member of the Al-Aqsa Martyrs' Brigades, which is affiliated to the Fatah movement led by Mahmoud Abbas, the Palestinian president.
Three other Palestinians were wounded in the exchange of gunfire with Israeli troops on Sunday.
An Israeli army spokesman said: "Soldiers saw an armed man and opened fire, wounding or killing him."
A Palestinian civilian from the same refugee camp was also shot dead by Israeli soldiers on Sunday, according to medical sources.
Amgad Tirawi, 27, was walking a dirt path near the Israeli settlement of Yizhar, south of Nablus, to circumvent a checkpoint when soldiers opened fire and killed him, the sources said.
The Israeli army denied responsibility for the shooting.
"We're not aware of such an incident.The IDF [Israeli army] didn't commit any shooting in the past hours in the area," said an army spokesman.
The latest deaths bring to 5,408 the number of fatalities since the 2000 outbreak of the second Palestinian uprising.
Meanwhile, striking Palestinian government employees have threatened to expand an ongoing strike to include 200 workers for the Petrol Company, which oversees the import and distribution of fuel in the Palestinian territories.
"If the government continues to ignore the workers' demands, we will take steps to escalate the strike to include employees of the Petrol Company who haven't received their salaries and are asking to join the strike," Ahmed Assaf, a member of the Public Sector Employees Union, said.
Tens of thousands of Palestinian civil servants have been on strike since September 2 to claim full salary payments.
Schools have closed and many other public services, including sanitation, have been affected by the strike action.
"There is no hope on the horizon for settling the crisis so the strike will continue and will only end when we receive our salaries," Bassem Hudaida, a union spokesman, said.
The Hamas government accused Fatah officials of orchestrating the strike in order to put pressure on the Islamist-led administration to agree to a national unity government.