A Palestinian policeman fired on a group of Israelis in a Palestinian-controlled area of the West Bank on Sunday, killing one and injuring four, the Israeli Army said.

The shooting occurred early in the morning near Joseph's Tomb, a flashpoint shrine under Palestinian control and off-limits to Israelis except on Army-organised, escorted trips.

In a statement, the Israeli military said Palestinian officials confirmed the shooter was a Palestinian policeman who opened fire "after identifying suspicious movements."

Israel's Magen David Adom medical service said shots were fired at three vehicles, which evacuated to the nearby settlement of Har Bracha.

"After attempts at reviving him, a man of around 30 years was declared dead. A young man of 20 was seriously injured and a youth of around 17 was moderately wounded. Two others were lightly wounded," the medical service said.

One of the men injured in the attack suffered a gunshot wound to the stomach and was in serious condition, while the second was shot in the shoulder and was in moderate condition, hospital medics said.

The Israeli Army said the worshippers had not obtained permission to go into the site.

"An Israeli civilian was killed and four others injured after entering Joseph's Tomb in Nablus unpermitted," the statement said, citing an account of the incident given by Palestinian officials.

"The civilians were shot by a Palestinian policeman who, after identifying suspicious movements, fired at their direction."

The statement said Israeli military and civil administration officials would meet with Palestinian security officials in the coming hours "in order to examine the incident."

Palestinian officials were tight-lipped about the details of the incident.

Palestinian security services spokesman Adnan Damiri said the "Palestinian Authority will investigate the circumstances of shooting at an Israeli vehicle that entered the area of Joseph's Tomb in Nablus without prior coordination."

Nablus governor Jibrin al-Bakri told AFP a Palestinian committee to investigate had been formed "with coordination with the Israeli side, and we will have to wait and see."

Settler sources named the man killed in the incident as Jerusalem resident Ben-Yosef Livnat, a 24-year-old father of four who is the nephew of hawkish culture minister Limor Livnat.

He was to be buried later on Sunday after a funeral procession from the Elon Moreh settlement where he was born, just east of Nablus.

Israeli defence minister Ehud Barak issued a statement "strongly condemning" the incident and calling on the army and Palestinian Authority to investigate.

"No breakdown in coordination can justify an event of this nature and firing at innocent people," he said.

The settler Yesha council also condemned the incident, accusing the Palestinian police of committing "murder," and warning the death "is not being ignored."

"These latest murders of Jews are the result of the incitement and hate on the part of the Palestinian Authority," the group said in a statement.

"It is also the result of the abandonment of Joseph's Tomb by the Israeli government 10 years ago in a moment of weakness."

As Livnat's body was transported from Elon Moreh, settlers attacked Palestinians at Huwara checkpoint south of Nablus, setting fire to one car and smashing another before Israeli troops moved in and closed the area.

Many Jews believe Joseph's Tomb to be the final resting place of the biblical Joseph, while Muslims believe that an Islamic cleric, Sheikh Yussef (Joseph) Dawiqat was buried there two centuries ago.