The U.N. denied Palestinian gunmen were in the compound and said the slain official, Iain Hook, was armed only with a cell phone he was using to try to evacuate U.N. staffers.
Hook, a British senior manager of UNRWA, the U.N. agency helping Palestinian refugees, was killed Friday in the compound in the Jenin refugee camp - the first senior U.N. official to die in over two years of Israeli-Palestinian fighting.
The dispute over his death was likely to inflame long-strained relations between Israel and the United Nations: while U.N. resolutions paved the way for the creation of the Jewish state in 1948, relations have been poisoned for much of the time since.
The army's preliminary findings were released Saturday amid fresh violence: Two Palestinian militants blew themselves up on an explosives-packed boat off the Gaza Strip, injuring four Israeli soldiers on a nearby navy patrol boat in a rare seaborne attack. The militant Islamic Jihad claimed responsibility.
Israel also pressed its occupation of the West Bank town of Bethlehem, reoccupied Friday after a suicide bombing in Jerusalem killed 11 people, four of them children. Israeli troops demolished four homes of alleged militants, arrested 26 people, and searched the office of Bethlehem's governor, witnesses said.
In its statement about the Jenin clash, the army said two soldiers fired at Hook inside the U.N. compound because he had "an object that appeared to be a gun."
The statement said Palestinian gunmen had been firing on Israeli troops from inside the UNRWA compound and, on seven occasions, from an adjacent alley.
The army said in two instances, the gunmen had used civilians as human shields, including one case where a gunman hid behind a woman holding an UNRWA flag.
Paul McCann, a U.N. spokesman, said the army's claim that gunmen were inside the compound was wrong.
"Our preliminary inquiry does not agree with the statement that firing could have come from the UNRWA compound. It in fact is quite clear from our inquiry so far that this report of firing from the compound is totally incredible," he said.
Hook, he added, had been on his cell phone in the moments before he was shot, trying to arrange for the evacuation of U.N. personnel from the compound.
A U.N. official from headquarters in New York was expected in Jenin on Sunday to conduct an investigation for the world body, McCann said.
Meanwhile, Hook's body was expected to be transported to Jerusalem for an autopsy before being transferred home to Britain.
The United Nations also said that Israeli soldiers had blocked an ambulance from immediately getting to Hook and that he died before reaching the hospital. The army said Hook was evacuated as soon as was possible.
In its statement, the army said it expressed sorrow over Hook's death.
Late Saturday, the Palestinian leadership decided to award Hook its highest medal, the Al Quds Sharif medal, or the Noble Jerusalem medal, and declared him a "martyr" of the Palestinian people, Palestinian officials said.
Palestinian leader Yasser Arafat also sent a letter of condolence to Hook's family, the officials said.
Foreign Minister Benjamin Netanyahu spoke about Hook's death to reporters Saturday, saying Palestinian gunmen had hidden behind the U.N. compound "seeking to create more casualties."
During the funeral of an 11-year-old Palestinian boy also killed in the Jenin clashes, some 2,000 mourners marched through the refugee camp Saturday, carrying an empty coffin draped with a U.N. flag in memorial to Hook.
They unfurled banners reading, "Israel killed Hook."
The boy, Mohammed Bilalu, was shot while throwing stones at Israeli soldiers, who had entered the Jenin camp in search of a wanted Islamic Jihad leader, witnesses said.
Palestinian Cabinet minister Saeb Erekat said the Palestinian Authority held the Israeli government "fully responsible" for Hook's death.
Meanwhile, the Israeli military closed the Mediterranean waters off Gaza, barring all Palestinian fishing, after Palestinian militants detonated a boat full of explosives late Friday near an Israeli patrol boat.
The Palestinian vessel had entered Israeli-controlled waters off northern Gaza and was approached by an Israeli navy patrol, which fired warning shots to force the boat to turn around, an army statement said.
The boat exploded, killing two Palestinians on board. Four Israeli soldiers on the patrol boat were injured, three of them moderately and a fourth lightly, the army said.
Islamic Jihad claimed responsibility, saying its boat rammed the Israeli patrol boat, sinking it, and that an Israeli rescue boat retrieved the four casualties. The army said the patrol boat was damaged but made it back to shore.
Col. Danny Maoz, a naval commander in the Gaza Strip, said a similar attempt was staged in November, 2000 off the southern Gaza Strip. In that incident, a lone suicide attacker detonated the explosives beside an Israeli patrol boat, but no Israelis were injured, he said.
Meanwhile, Israel continued its hunt for 30 wanted militants in and around Bethlehem, the hometown of the suicide bomber in Thursday's Jerusalem bus attack.
On Saturday, Israeli forces demolished the homes of four alleged militants of the Al-Aqsa Brigades, linked to Arafat's Fatah faction, bringing to six the number of houses destroyed since Friday, witnesses said.
Troops also blasted open the door of the office of Bethlehem Gov. Mohammad Madini and were seen carrying out computers and boxes of papers, witnesses said. The governor was not inside at the time. Military officials said troops searched the office and left.
With the incursion in Bethlehem, Israel has retaken control of all Palestinian population centers in the West Bank except Jericho, as it did during major military offensives in April and June.