A spokeswoman told AFP that troops in the northern West Bank city of Nablus destroyed the home of Rajeb Aliua early in the morning.
"He oversaw the terror squad which carried out the murder of Naama and Eitam Henkin" she said, adding that Aliua was a member of the militant Hamas movement.
The organisation has not claimed responsibility for killing the Henkins, who were shot in front of their young children as they drove on a West Bank road between the northern settlements of Itamar and Elon Moreh.
The October 1 shooting was followed two days later by a knife and gun attack in Jerusalem, in which a Palestinian said to be an Islamist militant killed two people and wounded two others, including a child.
It marked the beginning of a wave of violence which has so far claimed the lives of more than 120 people, including 103 Palestinians and 17 Israelis.
The army entered Nablus at around 2:00 am (0000 GMT) Thursday and blew up the second floor apartment several hours later, Palestinian police said.
Such demolitions, heavily criticised by rights groups, have regularly resulted in clashes between Israeli security forces and Palestinians.
Israel has stepped up the razing of homes as it seeks to halt a wave of knife, gun and car-ramming attacks that began in October.
The home demolished on Wednesday was the residence of Ibrahim al-Akari, who carried out a car-ramming attack on November 5, 2014, killing two people, including a border police officer, police spokeswoman Luba Samri said.
He then jumped out of his vehicle and attacked bystanders with an iron bar before being shot dead by police.
Israel says demolitions act as a deterrent to potential attackers, while rights groups and Palestinians say it amounts to collective punishment, forcing family members to suffer for acts committed by someone else.
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