Earlier on Tuesday, an Israeli court convicted two Jewish settlers of stealing army explosives that security officials suspected would be used in an attack on Palestinians, their lawyer said.
Two other Palestinians were injured in the Ram Allah shooting, on a road just outside Abud village, about 10km northwest of the town, close to the Jewish settlement of Halmish, medical sources said on Tuesday.
One was in critical condition, while the second fled the scene, they said.
The fatal victim was identified as Muhammad Ahmad Zahran, 18, from the nearby village of Dair Abu Mashal. The Molotov cocktail did not hit the car.
The latest death brings the overall toll since the start of the intifada in September 2000 to 3632, including 2712 Palestinians and 854 Israelis.
Earlier, two Jewish settlers were convicted of illegally possessing explosives on Tuesday. Sentencing will be at a later date.
The two were arrested in July while driving to Arab east Jerusalem in a car with 40kg of explosives. Their lawyer told Reuters there had been suspicions the men had planned to carry out an attack, but they had not been charged with plotting a bombing.
One of those convicted, Yitzhak Pas, was the father of a 10-month-old girl, shot dead by a Palestinian two years ago. The other was Pas’ brother-in-law Matityahu Shvu.
Prime Minister Ariel Sharon’s office said in August the men were suspected of involvement with a six-member Jewish cell indicted for planning a bombing attack on a Palestinian girls school in east Jerusalem in April.
An Israeli court in September sentenced three Jewish settlers 12 to 15 years in prison for trying to blow up the school.