Medical sources said that Mahmoud Abu Obeid, 25, the leader of the armed wing of Islamic Jihad in the northern West Bank city of Jenin was killed by Israeli special forces on Wednesday.
He was shot dead in Jenin by special forces dressed up as Palestinians, witnesses said.
The unit ambushed his car at a roundabout before firing into the car, the sources added.
There was no immediate comment from the Israeli military.
Abu Obeid's death comes one day after Israeli police arrested an Islamic Jihad operative from Jenin at a flat in a Tel Aviv suburb on suspicion of preparing a suicide bombing.
Islamic Jihad last carried out a suicide attack in Israel on January 29, when three people were killed in the Red Sea resort of Eilat