Israeli soldiers shot dead two senior militants of the radical Islamist Hamas movement during a raid in the divided southern West Bank city of Hebron, DPA reported according to Palestinian and Israeli officials.
Hamas' armed wing, the Qassam Brigades, vowed to avenge the killings, with its spokesman in Gaza, Abu Obeida, telling reporters his group would "respond to the attack in Hebron ... by all possible means."
"This assault will never break our will to resist the occupation," Abu Obeida said.
The armed resistance would not remain silent about "the crime," he warned.
Palestinian officials identified the two fatalities as Nashat Karmi and Mamoun Natsheh, commanders in the Qassam Brigades. Israel had accused the two of involvement in attacks against settlers in the West Bank.
An Israeli force had surrounded a building in which the two were hiding in Hebron's Jabal Jouhar neighbourhood, Palestinian officials said. The military then gradually began demolishing the building, while also opening fire, they said.
Witnesses said the Israeli army had besieged the entire neighbourhood since the early hours and proceeded in a house- to- house search to arrest wanted militants. Six Palestinians were arrested.
The army surrounded one three-storey building belonging to the Burqan family and ordered all residents to evacuate.
After most of the residents had left the building and the men were handcuffed and blindfolded and the women kept in a nearby building, the army proceeded to demolish the building, but only after opening fire at it while calling on those inside to surrender.
The Israeli military claimed the two were responsible for an August 31 shooting in the West Bank in which four Israelis were killed, on the eve of the launch of new, direct peace negotiations in Washington between Abbas and Israeli Prime Minister Benjamin Netanyahu.
The military said that, during the arrest operation, the wanted militants opened fire at the Israeli army force, which then returned fire, hitting one of the suspects.
Another suspect hid in a building which the soldiers surrounded, calling on him to surrender. The suspect refused to do so and opened fire on the soldiers. During the exchange, soldiers used "engineering tools" to get him to exit the building. The suspect was ultimately killed, the military said.
The deadly raid comes as the Arab League meets in Libya to discuss the fate of the direct peace negotiations.
Meanwhile, the Israeli daily newspaper Haaretz reported that Palestinian President Mahmoud Abbas had informed US envoy George Mitchell last week that if Israel renewed construction in West Bank settlements after its 10-month partial freeze expired, this would not only bring about the collapse of peace talks but would also prompt him to resign.
Haaretz quoted "Palestinian sources close to the PA leadership," who said Abbas told Mitchell of his plans during their last meeting together.