The body of 16-year-old Aysar Zaben was not found until after midnight, though the incident happened on Thursday on a road near the city of Ramallah, they said.
An Israeli police spokesman said an investigation into the incident had been opened and it was not clear exactly what took place or who was responsible.
Witnesses said a group of Palestinian teenagers threw rocks at a car carrying Jewish settlers as they drove past. The armed settlers then fired at the stone throwers.
The death was the first in violence between the two sides since Israel and the Palestinians began indirect peace talks on Saturday.
Some 500,000 Jewish settlers and about 2.5 million Palestinians live in the West Bank and areas near Jerusalem annexed by Israel after its victory in the 1967 Middle East war.
