Both Palestinian and Israeli authorities have confirmed the deaths, which occurred when clashes erupted during a routine arrest operation in Alar village, near the northern city of Tulkarem.
Israeli forces entered the village with the intention of arresting suspects.
They saw two men trying to escape a building believed to be a hiding place for militants, said an Israeli military spokeswoman.
“During an exchange of fire, the two terrorists were killed. Next to their bodies, the force found two bullet proof vests, two AK-47 machineguns and several rifle clips,” she said.
A third man was shot dead shortly afterwards.
It is the first deadly raid since Israel completed its withdrawal of settlers and soldiers from the Gaza Strip and parts of the West Bank.
Their deaths brought the overall number of people killed since the start of the Palestinian uprising in September 2000 to 4,829, according to an AFP toll.
Earlier, Palestinian security sources and residents in Alar village said they had been informed by Israeli troops that two Palestinian gunmen had been killed during a 10-minute gunbattle.
The village is considered to be a bastion of support for the radical Islamic Jihad faction.
Palestinian militants have been largely adhering to a truce agreement since the start of the year, and Israel has also scaled back its arrest operations in the West Bank.
However, the army resumed its activity against Islamic Jihad in July, several weeks after the group’s involvement in a number of deadly attacks in breach of the truce agreement.
Israel on Thursday dismantled its last military base in the northern West Bank, where it evacuated four small settlements as part of the disengagement plan.
Hours before the Dotan base was evacuated, soldiers shot dead an unarmed Palestinian man they said entered the installation and ignored their instructions to halt.