The move ends three days of confrontation after about 2,500 demonstrators marched into the abandoned settlement on Monday saying they were going to rebuild it.
Some set up large canvas tents and began to pile up rubble.
About 450 people remained as police moved in on Wednesday morning.
Homesh was dismantled in the summer of 2005 as part of former Israeli prime minister Ariel Sharon's disengagement plan.
The area was established as a military outpost in 1978 and turned over to settlers in 1980.
Ehud Olmert was elected last year as Sharon's successor on a pledge to evacuate additional West Bank settlements and draw Israel's borders without waiting for a peace deal with the Palestinians.
|About 2,500 people had converged on the |
settlement before police intervened [AFP]
However, that plan has been sidelined after he was politically weakened by Israel's war against Hezbollah in Lebanon last summer.
One demonstrator told Israeli army radio he would be back.
Yossi Dagan said: "Our goal is not to clash, but to return again and again and again until the flag of Israel will once again fly over the lands we were expelled from because all the country understands now that the disengagement, the expulsion, was a mistake."
While removing the Homesh squatters, the Israeli government has shown far less resolve in evacuating settlers who have set up dozens of unauthorised settlement outposts in the past decade.
Since the Israeli evacuation of Homesh in 2005 local Palestinians have not been able to use it, primarily because of the continued presence of the army.
Government spokeswoman Miri Eisin said on Wednesday that Israel would remove the new outposts.
Around 270,000 Jewish settlers live in the occupied West Bank among about 2.5 million Palestinians.
The World Court has ruled that settlements built on land captured by Israel in the 1967 Middle East War are illegal.
Elsewhere in the West Bank on Wednesday Israeli troops killed an armed Palestinian in a Jenin refugee camp, according to Palestinian security sources and witnesses.
Security sources identified him as a 21-year-old from al-Aqsa Martyrs Brigades. They originally said he belonged to Islamic Jihad.