A Palestinian woman was shot dead in the West Bank on Wednesday, the Palestinian health ministry said, with the Israeli army saying she had tried to ram soldiers with a car.

The Israeli army said "an assailant arrived in her car and attempted to ram into a number of IDF soldiers" near Hizma, south of Ramallah, before she "exited her vehicle with a knife drawn."

"The soldiers responded with fire towards the assailant and neutralised her," it said.

The Palestinian health ministry said the woman died of her wounds.

"The Palestinian civil liaison informed the health ministry of the death of a woman shot by (Israeli forces) in Hizma," it said in a statement, citing the organisation that coordinates with Israel on military and civilian issues concerning the occupied West Bank.

Official Palestinian news website Wafa identified the woman as Mai Afana, 29, from the town of Abu Dis, which is east of Jerusalem.

Her family rejected claims she had launched an attack.

"According to the information we have, Mai took this road by mistake, and did not attempt to carry out an attack as claimed by the occupation (Israeli forces)," her uncle Hani Afana told AFP.

"Mai had recently graduated from a Jordanian university, had a four-year-old daughter, and had no problems," he said, adding he wanted the circumstances of her death to be investigated.

The incident came amid fresh tensions between Israel and the Palestinians.

Israel carried out air strikes early Wednesday targeting what it described as Hamas military compounds in the Gaza Strip after people in the Palestinian territory launched incendiary balloons at southern Israel.

The balloons, which Israel said caused over 20 fires, were sent in the wake of a march by ultranationalist Israelis in Jerusalem's flashpoint Old City on Tuesday.

It was the first flare-up in violence between Israel and Palestinian militants in Gaza since a May 21 ceasefire ended 11 days of heavy fighting between the two sides.

Israeli strikes on the Gaza Strip between May 10 to 21 killed 260 Palestinians including some fighters, the Gaza authorities said.

In Israel, 13 people were killed in the fighting, including a soldier, by rockets and missiles fired from Gaza, the police and army said.