A Palestinian man has been shot dead after he allegedly rammed his vehicle into a group of Israeli soldiers, injuring one, near a settlement in the occupied West Bank.

Reports quoting an Israeli army spokesman said the man emerged from his vehicle brandishing a knife after the ramming near Bethlehem intersection on Monday, prompting another soldier to shoot him.

The Palestinian news agency Ma'an identified the Palestinian as 24-year old Muhammad Ibrahim Jibril from the West Bank area of Tuqu.

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Ma'an said Jibril was treated by the Israeli army at the scene before being declared dead.

Israel's emergency medical service was also quoted by Ma'an as saying that a 20-year-old Israeli soldier was taken to a hospital in Jerusalem for treatment.

The Haaretz newspaper said the Israeli soldier was "moderately injured", and suffered from wounds to his upper and lower limbs.

A witness told Ma'an he saw the Palestinian, who was wearing a red shirt, lying motionless on the ground.

Another witness said that an Israeli ambulance later evacuated the body, after Israeli forces prevented the Palestinian Red Crescent ambulances from approaching the scene.

According to Ma’an, Jibril is the 37th Palestinian to be killed by an Israeli in 2017. A total of eight Israelis were killed by Palestinians during the same period last year.

Since 2015, there have been more than 250 Palestinians killed by Israeli fire, and 42 Israelis killed by Palestinian assailants.

Palestinians say the attacks stem from anger over decades of Israeli occupation in territory they claim for their state.

Israel blames the violence on incitement by Palestinian political and religious leaders.

A number of local and international human rights groups have raised concerns that Israeli security forces have used excessive force when confronting Palestinians who had carried out attacks or been suspected of doing so.

The Israeli police relaxed its open-fire regulations in December 2015, permitting officers to open fire with live ammunition on those throwing stones or firebombs as an initial option, without having to use non-lethal weapons first.

The latest incident comes as Israel's intelligence minister proposed on Monday to annex five settlements into the Jerusalem municipality, while also removing around 100,000 Palestinians from the city's census.