STORY: Israeli forces also killed two Palestinian militants during clashes that were set off when the army came for the demolition, Palestinian sources said.
The fatalities in Kafr-Dan village were the first for Palestinians since Israeli Prime Minister Benjamin Netanyahu retook office last week at the head of a hard-right coalition.
Troops shot at Palestinians in Kafr-Dan who attacked them with gunfire, rocks and firebombs, the army said in a statement. There were no Israeli casualties in the incident.
Hamas, an Islamist group that runs the Gaza Strip, and a rival organization in the West Bank each claimed one of the two dead Palestinians as a member.
In a statement, Hamas, which rejects coexistence with Israel, vowed to "pursue resistance and confront the terrorism and fascism of the new Occupation government."