Ahmed Abdullah Abu Shalal had been responsible for a "number of terrorist attacks" over the past year, including one in annexed east Jerusalem, the army said.
He was "eliminated in a precision air strike," it said in a statement that had a video link showing the strike on a vehicle.
An AFP correspondent saw a pile of debris and mangled remains of a car that was hit in the strike near the Balata camp in the northern West Bank city of Nablus.
Camp resident Sajed Hazeem said he was woken up by a loud explosion.
Minutes after the blast an ambulance arrived at the scene but its access to the car was blocked by Israeli troops who arrived at the same time, Hazeem said.
"The army pulled out the bodies and after about half an hour it withdrew," Hazeen told AFP, indicating that more than one individual had been killed in the strike.
The Palestinian health ministry in Ramallah said the body of an "unidentified martyr killed by the occupation (Israel) in a bombing of a vehicle" had been received by a hospital in Nablus.
The army said Abu Shalal was killed following intelligence "of his cell's intentions of carrying out an imminent terrorist attack".
The army did not offer details, but said he was responsible for carrying out a shooting in the Shimon HaTzadik neighbourhood of east Jerusalem in April last year in which two residents were wounded.
Abu Shalal was also responsible for a bomb attack on Israeli troops in October in which one soldier was wounded. The army did not specify where the soldiers were targeted.
"Under Abdullah's leadership, the terrorist infrastructure in the Balata (refugee) camp in Nablus has received funding and guidance from Iranian sources," the army claimed.
Since the start of the Israel-Hamas war in Gaza on October 7, the West Bank has experienced a level of violence not seen since the second Palestinian uprising or intifada between 2000 and 2005.
Israeli army raids and attacks by settlers have killed around 350 people in the territory, according to an AFP tally based on sources from both sides.
Israel has occupied the West Bank, home to about three million Palestinians, since the Six-Day War of 1967.
Excluding annexed east Jerusalem, the territory is home to around 490,000 Israelis who live in settlements considered illegal under international law.
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