Local authorities have said three Israeli security personnel after a Palestinian gunman opened fire on them.
The incident took place near the Jewish settlement of Har Adar - 18km northwest of Jerusalem - on the occupied West Bank, according to the police.
The gunman, who has been named in local media as 37-year-old Nimer Jamal, was shot shortly afterwards and died of his injuries.
Jamal, who had an Israeli work permit to allow him to take jobs inside Jewish settlements, had arrived at a rear checkpoint to enter the settlement when he raised suspicion from guards.
Security services say he opened fire shortly afterwards.
The Israeli Prime Minister, Benjamin Netanyahu, blamed the incident on Palestinian incitement, while figures from the Palestinian Authority said the Israelis were at fault.