On Tuesday, when Israeli troops began the large-scale incursion, an Israeli soldier and a teenage Palestinian fighter were killed in the camp.
Around 60 Israeli Jeeps and bulldozers were deployed on Wednesday as troops searched house to house for suspected fighters and weapons.
Israeli forces closed off all main gates and the main road leading to Beit Ain al-Maa refugee camp using sand barricades, Al Jazeera's correspondent in the West Bank said.
For a second day, the camp's 5,000 residents were under curfew and the sound of explosions and gunfire rocked the area. Israeli troops deployed on rooftops of buildings surrounding the camp.
The Israeli military, in a statement, said that "IDF [Israel Defence Forces] entered the area in order to prevent the execution of... a terrorist attack" which it claimed was being planned by Hamas and the Popular Front for the Liberation of Palestine (PFLP).
At least four Palestinians were seized in the camp on Tuesday, Palestinian and Israeli sources said.
Wednesday's death brought to 5,865 the number of people killed since the second Palestinian uprising erupted in September 2000, the vast majority of them Palestinians, according to an AFP count.