Israeli reports said the army bragged about being able to kill Jarrar after running weeks of wide-scale manhunt for him in the north of the West Bank.
A medical source named the dead person as Khaled Tayeh, a man in his 20s who had been shot in the chest.
Israeli forces on Tuesday shot dead a Hamas militant suspected of murdering a rabbi as two killings of Israeli settlers in a month sparked deadly clashes in the occupied West Bank.
Palestinian territories have remained dogged by tension since U.S. President Donald Trump recognized Jerusalem as Israel's capital last December.
Official Palestinian Authority (PA)-owned Wafa news agency reported that Israeli forces raided the Zamaareh family home following the incident, causing clashes to erupt with residents in the area. Israeli authorities plan to build thousands of homes for Jewish-only settlements in E1, which would effectively divide the West Bank and make the creation of a contiguous Palestinian state - as envisaged by the two-state solution to the Palestinian-Israeli conflict - nearly impossible.
Eyewitnesses said the soldiers fired dozens of live rounds at the Palestinians, while many locals hurled stones at the invading forces.
Meanwhile, Israeli forces rounded up 17 Palestinians in overnight raids in the Israeli-occupied West Bank, according to a Palestinian NGO. Israeli forces have carried out daily raids and increased the arrests of Palestinians in the hunt of the perpetrator.
Israel faced sharp criticism from the administration of former United States president Barack Obama over settlement construction, but that has not been the case with Trump's White House. Two Israelis have been killed in that timeframe.