Ahmad Ismail Khatib was shot last week while Israeli forces were carrying out a raid on Jenin in the West Bank.
Khatib died on Saturday, relatives and medical officials said.
Israeli forces say they mistook the boy for an armed fighter during an exchange of fire on Thursday. He was carrying a toy M-16 rifle, Israeli military officials said.
He was taken to an Israeli hospital with wounds to his head and stomach.
Dr Tzvi Ben-Yishai, a spokesman for Rambam Hospital in Haifa, said the boy’s parents had decided to donate his organs “to bring hearts closer and bring peace closer”.
The boy’s uncle, Jamal Khatib, confirmed that the family had donated the boy’s organs.
The shooting occurred on the first day of Eid al-Fitr, a major Muslim holiday, when Palestinian children are traditionally given toys, including plastic guns, as presents.
At the time, the soldiers were pursuing a member of the Palestinian resistance group Islamic Jihad who had escaped, Palestinian witnesses said. More than 30 military Jeeps had entered the town with Apache helicopters circling overhead.
According to Palestine Red Crescent Society figures, 682 Palestinian children under the age of 18 have died during the second intifada (uprising) between 29 September 2000 and 29 September 2005. Of those, 158 were under 12-years old.
The army has expressed regret over the shooting.
Also on Saturday, medical and security sources said four Palestinian youngsters had been injured in clashes with Israeli forces when they stormed Qabatiya village, in the northern West Bank.