Ben Yosef Livnat, 24, was killed and four other Israelis wounded after Palestinian police opened fire on their vehicle as they attempted to exit Nablus after sneaking in to pray at Joseph's Tomb.
The Israeli worshipers entered the city without coordinating their entry with the Israeli military, Haaretz said.
Prime Minister Binyamin Netanyahu and Defense Minister Ehud Barak both condemned the shooting, The Jerusalem Post reported.
Livnat, the nephew of Israeli Culture and Sports Minister Limor Livnat, was buried in Jerusalem Sunday.
"It was a murder, not just an incident. My nephew and his friends were shot in cold blood. They were not armed they were shot just because they came to pray at Joseph's Tomb," Livnat said in an interview on Israel Radio.
Nablus Gov. Jibrin al-Bakri said senior Palestinian security officials met with their Israeli counterparts Sunday night in an effort to calm tensions in the city, Haaretz reported.
Ziad Otman, a spokesman for the governor, told Haaretz the Israelis entered Joseph's Tomb without coordinating their entry at 5 a.m. Sunday. Further details concerning the incident are being investigated he said. Otman said access to Joseph's Tomb must be coordinated with authorities.
An initial probe conducted by the army said a verbal confrontation between the worshipers and Palestinian officers deployed at the site occurred and that vehicles carrying the worshipers failed to stop at a Palestinian checkpoint, the Post said.
Palestinian police fired warning shots in the air as the worshipers fled killing Livnat. Israeli military officials believe the Palestinians were fully aware that the worshipers were unarmed and posed no threat, the Post said.
The Oslo Accords granted the Palestinian Authority full control of Nablus but said the tomb would remain under Israel's control.
In 2000, Barak decided to pull back the Israeli presence from the tomb after a battle erupted between Israeli security forces and Palestinian gunmen resulting in the death of Israeli soldier Madhat Yusef, who bled to death while waiting to be evacuated.
In 2007, after the tomb was refurbished, Israel agreed to grant Jewish worshipers coordinated access to the site accompanied by Israeli security forces.