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Israeli forces killed two Palestinian gunmen on Tuesday in clashes that broke out during a raid in a refugee camp in the occupied West Bank, the Islamic Jihad militant group said.

Witnesses said undercover Israeli forces exchanged fire with Palestinians during a pre-dawn raid in the camp of Jenin. The Palestinian Islamic Jihad said the militants killed in the fighting were members of the group.

Israel's border police said its undercover forces came under heavy gunfire during an operation in the camp to arrest a suspect wanted for what it described as "terrorist activity".

After the man was detained, gunmen fired at the Israeli forces and a crowd of around 150 Palestinians threw fire-bombs, stones and an improvised grenade at them, the border police statement said.

The Israeli forces responded with live fire and suffered no casualties, according to the statement. The Palestinian Health ministry confirmed two Palestinians had been killed.

Israel captured the West Bank, Gaza Strip and East Jerusalem - territories where Palestinians seek statehood - in the 1967 Middle East war. International criticism of its treatment of Palestinians has been growing since the last round of peace talks collapsed in 2014.

The Palestinian Authority, set up under interim peace accords with Israel in the 1990s, exercises limited self-rule in the West Bank, but Israeli forces are dominant in the area, where they often carry out raids to detain suspected militants.(reuters)