AFP journalists witnessed the operation during the protest by around 100 to 150 Palestinians, including some who threw stones at Israeli soldiers, near a military checkpoint in the occupied West Bank.
The operation saw a few dozen soldiers move from further down the street toward the crowd.
Suddenly, several men wearing keffiyehs or balaclavas, including one with a Palestinian flag wrapped around his head, pulled out pistols.
One threw a smoke grenade while others fired in the air. The army then rapidly moved toward the remaining protesters, who fled.
Medics on the scene said three Palestinians had been injured during the protests.
Israel’s military had not immediately responded to a request for comment.
Rare video footage of the operation was captured by an AFP journalist.
Israeli forces regularly carry out such operations against stone-throwing protests in which agents pretend to be demonstrators before turning on the crowd.
Such agents are referred to by Palestinians as mustarabeen, a word used to refer to those who disguise themselves as Arabs.
Wednesday’s protest was part of demonstrations and clashes that have occurred in the Palestinian territories since US President Donald Trump’s recognition of Jerusalem as Israel’s capital a week ago.
Four Palestinians have been killed so far in clashes or Israeli airstrikes in response to rocket fire from Gaza. One Israeli has been seriously wounded in a stabbing attack in Jerusalem.