A spokeswoman for the Israeli army said the boat “deviated from the designated fishing zone in the northern Gaza Strip.”
Naval forces called on the boat to halt, then fired warning shots in the air before shooting toward it when the three people on board did not stop, the spokeswoman said.
A severely wounded Palestinian later died from his wounds, she said. The other two Palestinians were detained by security forces.
The fishermen’s union in Gaza said a boat with three fishermen was fired upon by Israel’s military.
Israel and Palestinian activists in Gaza have fought three wars since 2008 and the territory has been under an Israeli blockade for more than 10 years.
Fishing off the northern part of the strip, adjacent to Israel, is limited to six nautical miles offshore and the Israeli navy regularly fires at Palestinians at the zone’s outer limit.
Such incidents rarely result in deaths.
The Gaza Strip’s border with Egypt has also been largely closed in recent years.