The Israeli military said three soldiers were wounded, including one seriously, but said it was investigating whether the injuries were due to stray bullets fired by other troops.
Four Palestinians were wounded in addition to the two who were killed at the Qalandiya refugee camp in the occupied West Bank, located near a checkpoint at the entrance to Jerusalem, the Palestinian health ministry said.
"Tonight, during an operation to make arrests of wanted Palestinians and to seize arms in Qalandiya refugee camp, two attempted car-ramming attacks were made against security forces in two different parts of the camp," the Israeli army said in a statement.
Witnesses said clashes erupted during the raid and lasted for several hours.
Two cars were later seen with a large number of bullet holes in the camp.
The raid came amid almost daily knife, gun and car-ramming attacks by Palestinians and clashes with Israeli soldiers since October 1.
The violence has killed 119 on the Palestinian side, 17 Israelis, an American and an Eritrean.
Many of the Palestinians killed have been attackers, while others have been shot dead by Israeli security forces during clashes.
Last month at Qalandiya, Israeli forces shot dead two Palestinians when heavy clashes erupted during an operation to demolish the home of an alleged attacker, part of a series of punitive demolitions.
Qalandiya camp was established in 1949 in the wake of the creation of Israel and has grown into a densely populated town with 11,000 registered refugees.
Yesterday, the UN human rights office voiced deep concern over an "unacceptable" wave of Palestinians attacking Israelis, but also criticised Israeli authorities' reported "excessive use of force" in response to the attacks.
"We call on both Israeli and Palestinian leaders to act decisively to de-escalate the situation," she added.
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