The bloodied body of Mohammed Sidr, 25, was pulled from the rubble of a small warehouse after daybreak Thursday, after a standoff of several hours during which he occasionally traded fire with troops.
Israel accuses Sidr of planning several bombing and shooting attacks, and Israeli Defense Minister Shaul Mofaz on Thursday called him a "ticking bomb." In December, Israel tried to kill Sidr in a helicopter strike, but he escaped. Two boys, ages 3 and 13, were killed instead.
Meanwhile, Mofaz met Thursday with U.S. envoy John Wolf and was planning to meet with Palestinian officials later in the day.
According to Haaretz newspaper, Israel is offering to make commuting easier for Palestinians who work in Israel, but says it will continue to make pinpointed attacks against specific terrorist targets, particularly in Nablus and Jenin.
In addition, Israel will not hand over security control in other West Bank towns to the Palestinian Authority until it sees some progress by the Palestinians against terrorism in other towns already under its jurisdiction.
The raid that killed Sidr began at about midnight, and soldiers repeatedly called on Sidr over loudspeaker to surrender, witnesses said. The army said he fired at troops, and a gunfight ensued. At one point, an army bulldozer tore down the back wall of the warehouse. Israel Radio said troops fired an anti-tank missile, setting off blasts inside, apparently an explosives cache. Sidr apparently was alone.
After the body was pulled away, troops blew up the warehouse.
Israel holds Sidr responsible for the deaths of 19 Israelis and two international observers, one from Switzerland and one from Turkey, in several bombings and shootings. Eighty-two people were wounded in these attacks, the Israeli military said.
Sheikh Bassam Sadi, leader of Islamic Jihad in the West Bank, promised revenge. "I assure our people that this crime in Hebron will not go unpunished," he said.
A statement on Islamic Jihad's Web site later said retaliation would be "like an earthquake in the heart of the Zionist entity."
The killing of two Hamas members under similar circumstances last week led to a revenge attack on Tuesday in which a teenage Hamas suicide bomber killed a Jewish settler. On the same day, a bomber blew himself up in a supermarket in a central Israeli town, killing himself and a father of two. The Al Aqsa Martyrs' Brigades, a militant group with ties to Yasser Arafat's Fatah movement, claimed responsibility.
Israel and the Palestinian Authority are deadlocked over how to handle the Palestinian militant groups, and the argument is holding up implementation of a U.S.-backed peace plan, the so-called "road map" to Palestinian statehood by 2005.
Israel demands that the Palestinian Authority begin dismantling the two main groups, Hamas and Islamic Jihad, as part of its obligations under the road map. Palestinian Prime Minister Mahmoud Abbas says he will not confront the militants for fear of sparking a civil war.
Israel, in response, says it will not go on with the road map under these circumstances, and instead keeps chasing militants. Mofaz said Sidr posed an immediate danger. "He was indeed a ticking bomb. This is another example that terror is continuing, and that the Palestinian side is not acting to dismantle the terrorist infrastructure," he said.
Saeb Erekat, a Palestinian spokesman, said the United States must intervene quickly to rescue the cease-fire. "Without a firm stand from the United States that the two sides live up to their obligations with one grand gesture — that is the immediate implementation of monitoring ... the cease-fire is finished," he said.
The militants who declared a unilateral three-month truce on June 29 see the ongoing Israeli raids as a provocation. The militants argue that the terms of their cease-fire permit them to avenge the killings of activists by troops.
Also Thursday, Israeli troops in the West Bank city of Nablus destroyed the family home of the Hamas bomber who carried out Tuesday's attack, and arrested an alleged militant in the neighboring Askar refugee camp.
The Askar home of the other suicide bomber was destroyed a day earlier.