Human shields banned
In 2005 Israel's supreme court ruled that the army's use of human shields was illegal.
However, Palestinian officials and some human rights groups say such incidents have become common practice during the seven-year-old Palestinian uprising and that it endangers the lives of civilians.
Saeb Erekat, the chief Palestinian negotiator, said: "The Israeli government must stop such unethical practices immediately."
The Research Journalism Initiative said it filmed the incident in the course of an Israeli raid on the home of a "wanted militant".
During the operation, troops damaged the house, but did not find the man.
Sam Neil, an activist with the Research Journalism Initiative, in a phone call with Al Jazeera from Nablus, said the use of civilians as shields was "extremely common".
He said: "I'd go so far as to say they are standard practice ... I've personally witnessed Israeli soldiers using human shields in various capacities nearly a dozen times since 2002."
Last month, Israeli soldiers used an 11-year-old Palestinian girl as a human shield during a raid in Nablus, an Israeli human rights group said.
Mustafa Barghouti, the Palestinian information minister, denounced the officer's suspension as "window-dressing".
He said: "They are treating it as an isolated incident. The problem is systematic and ... they [the troops] continue the practice despite the court order."