Witnesses said it was unclear whether the man, aged 19, was killed by a mob of settlers – many of whom carry weapons – or soldiers who had been stationed in the area.
The Israeli military said dozens of settlers and townspeople threw rocks at each other. A Palestinian threw a brick at soldiers and they fired in return.
“A hit was identified,” the Israeli military said, meaning a person was struck by the soldiers' gunfire. The army did not identify the person.
An Israeli military representative said the army was unaware of a settler having fired a weapon during the confrontations.
There has been a sharp rise in violence this year in Huwara, a small town on the road between Ramallah and Nablus in the northern West Bank, with settler attacks escalating after a lethal attack on two Israeli settlers in February.
A settler rampage through the town followed, during which cars and dozens of homes were burnt down, and one Palestinian was killed.
The Israeli army was heavily criticised for not intervening in the attacks but later called them a “pogrom,” or hate-motivated religious riot.
Bezalel Smotrich, Finance Minister in Prime Minister Benjamin Netanyahu’s government, provoked outrage when he later said Huwara should be “wiped out.”
On Thursday, a suspected Palestinian gunman shot at an Israeli vehicle in Huwara carrying three members of an Israeli family.
Israeli security forces tracked him down and killed him. The family was unharmed.
The attack came hours after two Palestinian gunmen and five Israeli soldiers were wounded in separate clashes.
The occupied West Bank, among the territories where Palestinians seek statehood, has experienced a surge of violence in recent months amid an almost decade-old impasse in US-sponsored peacemaking efforts.