At least 15 people were injured in the clashes in the Kalandia encampment, with the United Nations pegging the number wounded at about 20, one of them a U.N. agency worker.
The United Nations issued a release in New York saying one of those killed was a worker for its Relief and Works Agency for Palestine Refugees in the Near East.
"Credible reports say that he was on his way to work and was not engaged in any violent activity. UNRWA representative Chris Gunness said in the statement. "He was shot in the chest."
"Another UNRWA staff member, a sanitation laborer, was shot in the leg during the same operation and is in a stable condition. An UNRWA investigation is ongoing."
Gunness did not identify the victim but said he was 34 years old.
Fighting erupted after Israeli Border Police stormed the Kalandia camp to arrest Yusef al-Khatib, a Palestinian prisoner recently released by Israel, the Ma'an News Agency reported.
The three Palestinians killed were identified as Robin al-Abed, 32; Younis Jihad Abu al-Sheik Jahjouh, 22; and Jihad Asslan, 20, the news agency said.
Palestinian Authority President Mahmoud Abbas' spokesman, Nabil Abu Rudeinah, condemned the raid, calling it a crime against the Palestinian people.
The U.N. relief agency called on all parties to "exercise maximum restraint and to act in accordance with obligations under international law."