The clashes that included gunfire lasted for hours at the city of Jenin in the northern West Bank and were among the most violent to occur there in recent years.
Israel's military said in a statement that the raid was carried out to arrest a "senior Hamas operative".
"During the activity, after repeated calls to surrender himself to the forces, security forces demolished the house in which the wanted terrorist was suspectedly hiding," it said.
Israeli public radio said it was possible that the soldier had been injured when Israeli forces opened fire.
Palestinian security sources and witnesses said that the clashes included exchanges of gunfire between protesters and security forces. They reported five Palestinians lightly wounded.
Palestinian security officials said the house targeted in the raid belonged to Majdi Abu al-Hija, a Hamas official, who was arrested.
They added that a militant from the radical Islamic Jihad group managed to escape during the raid.
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