Keeping pressure on militants elsewhere in the West Bank, Israeli soldiers moved back into Nablus and clamped a curfew on thousands of people, a day after residents said the army had ended a raid - the biggest in months - that began on Saturday.
Near Jenin's refugee camp, an Israeli undercover unit ambushed a car in which Ashraf al-Saadi, described by Islamic Jihad as a commander in its armed wing in the West Bank, was travelling.
Witnesses said Saadi was wounded by Israeli gunfire and two other men in the vehicle, Mohammed Abu Naaseh and driver Ala al-Breiky, were killed outright. Saadi fled on foot and fired a pistol, but was shot dead by the plainclothed unit after falling to the ground, the witnesses told Reuters.
"Israeli forces came to arrest the wanted men. Saadi spotted the unit, took out a pistol and fired at it, wounding a (paramilitary) border policeman. The force fired back, killing the three men," an Israeli military spokesman said.
An Islamic Jihad official in the West Bank identified Abu Naaseh as one of its leaders in the Jenin area and said Breiky did not belong to the group but was driving the vehicle.
Israeli security sources said Saadi had co-operated with senior Islamic Jihad members involved in suicide bombings in Israel in 2005 and 2006. The sources described Abu Naaseh as a senior Islamic Jihad commander in Jenin refugee camp.
ESCALATION:
In Nablus, a militant stronghold, soldiers resumed house-to-house searches for wanted men and detained at least 50 people for questioning, residents said.
The Israeli army said a soldier was wounded by an explosive device during what it described as "operations against terrorist infrastructure" in the city. A local hospital said an 18-year-old Palestinian was critically wounded by Israeli gunfire while throwing stones at soldiers. In Gaza, Palestinian Prime Minister Ismail Haniyeh, a Hamas leader, said Israel's intensified military activity was an expression of its rejection of a unity deal the Islamist movement agreed with the rival Fatah faction in Makkah, Saudi Arabia earlier in the month.
"This escalation aims to abort the Palestinian and Arab steps which aim to break the siege imposed on our people," he said, referring to a Western aid embargo imposed on the Palestinian Authority after Hamas came to power in March.
The Makkah pact fell short of meeting demands by a Quartet of Middle East mediators - the United States, the European Union, the United Nations and Russia - to recognise Israel, renounce violence and accept existing interim peace deals.
Islamic Jihad vowed in a statement to "carry out a painful response" to what it described as an assassination in Jenin. An Islamic Jihad suicide bomber killed three Israelis in an attack in Israel's Red Sea resort of Eilat a month ago.
The group did not sign on to a Gaza truce that militants agreed with Israel in November and said at the time it wanted to extend the ceasefire to the West Bank. After the Jenin incident, Islamic Jihad fired several Qassam rockets from Gaza at southern Israel, causing no casualties.