The attack happened late on Friday near the Jewish settlement of Ofra, northeast of the city of Ramallah, an army statement said.
The assailant attempted to run over soldiers with his car, prompting them to open fire. He then got out of the vehicle brandishing a knife and troops fired again, seriously wounding him, the statement said.
There has been a spate of car-ramming and knife attacks in Israel and the Palestinian territories, most of them in the West Bank or annexed east Jerusalem.
Israel says incitement by Palestinian leaders and media is a leading cause.
Human rights groups have accused Israeli security forces of using excessive and often lethal force in tackling the violence, most of which has been carried out by lone-wolf assailants, many of them young.
Internal reviews by the army of two fatal shootings of attackers earlier this month found that the use of deadly force could have been avoided, public radio reported on Tuesday.
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