Israeli forces raided a Palestinian city in the occupied West Bank overnight to arrest suspects in the recent murder of an Israeli, leaving one of them dead and sparking clashes, officials said.

Two Israeli special forces members were wounded during the raid on Jenin that began late Wednesday and continued into Thursday morning, the Israeli military said. A number of arrests were made.

The Palestinian health ministry confirmed a Palestinian was killed in the operation, naming him as Ahmed Ismail Jarrar, 31.

It had earlier identified the dead man as Ahmed Nasser Jarrar, 22 and the son of a militant from the Hamas Islamist movement.

The whereabouts of Ahmed Nasser Jarrar remain unclear, with his family saying he was missing.

Palestinian witnesses said they saw at least two Palestinians arrested, with clashes continuing into Thursday morning.

Witnesses said two houses belonging to the family were also demolished during the operation.

The Israeli military said that during the raid "a violent riot was instigated. Palestinian rioters hurled IEDs (improvised explosive devices), blocks and rocks and fired at the forces."

"In order to disperse the violent riot, forces responded with riot dispersal means and fired live rounds selectively," it said.

Videos posted online by Palestinians showed multiple Israeli armoured vehicles entering the city.

Israeli Prime Minister Benjamin Netanyahu, on a visit to India, said in a statement that "we will track down all who attack us and we will hold them accountable."

Raziel Shevah, a 35-year-old rabbi, was shot dead near Havat Gilad, the wildcat Jewish settlement outpost he lived in near the West Bank city of Nablus, on January 9.

Israeli forces have been hunting for the assailants since then, with roadblocks and checkpoints set up around Nablus following the murder.

There are frequent tensions between Israeli settlers in the Nablus area and Palestinians. Some 600,000 Israeli settlers live in the West Bank and annexed east Jerusalem alongside nearly three million Palestinians.

US President Donald Trump's recognition of Jerusalem as Israel's capital on December 6 triggered unrest in the Palestinian territories, although it was unclear if the murder was related.

Eighteen Palestinians have been killed since Trump's declaration, most of them in clashes with Israeli forces. Shevah is the only Israeli killed during that time period.