"Two young men were rushed to the hospital with bullets in their chests," the Jericho Hospital's director told Reuters.
The Palestinian Health Ministry identified those killed as Qusay Al Walaji, 16, and Mohammed Nujoom, 25.
The Israeli military said Palestinians opened fire at forces operating in the Aqabat Jabr refugee camp near Jericho and the forces fired back.
Residents said there were armed clashes but it was not clear whether the two men were involved in these clashes or not.
The raid lasted for less than an hour, the residents added.
The Palestinian Prisoner's Society in Jericho said that Israeli forces also detained a 20-year-old youth from the camp, the Palestinian news agency Wafa reported.
Violence in the West Bank, among territories where the Palestinians seek to establish a state, has worsened over the past 15 months with increased Israeli raids, Palestinian street attacks and assaults by Jewish settlers on Palestinian villages.
Israel captured the West Bank, which Palestinians hope will form the core of a future independent state, in the 1967 Middle East war. It has since built large settlements there while US-sponsored statehood talks have stalled.