The man, Walid Obeidi, also known as Abu al-Qassam, was responsible for all the organization's activities in the West Bank, including shooting attacks and attempted terror attacks inside Israel.
Obeidi, 45, the father of three from the village of Birkin near Jenin, was appointed commander of the Jihad's military wing following the killing of the organization's leaders Louay Saadi of Tulkarem Hussein Jaradat of Jenin.
Security forces have attempted to arrest and to assassinate Obeidi, who has been wanted since the start of the intifada, several times in the past.
Sources in the defense establishment pointed a finger at Damascus. "Syria is the one responsible for the Islamic Jihad's activity in the northern Samaria," a source told Ynet, adding that "tonight's operation was extremely successful."
Ibrahim Abu Rob, a wanted Jihad member, was arrested in the raid. An M-16 rifle was found on Obeidi's body.
Obeidi had been an active member of the Islamic Jihad since the 1980s. According to the IDF, Obeidi was responsible for a number of suicide bombings, including a terror attack in Tel Aviv which killed 11 people in April 2006. He was also behind an explosive belt seized on the Jerusalem-Tel Aviv Road on March 2006.
Two other wanted Palestinians were injured in Wednesday's raid. The IDF reported that the force encircled a building where the wanted men were hiding. Exchanges of fire erupted in the area, but there were no injuries among the soldiers. The two injured Palestinians were evacuated to an Israeli hospital.
Ibrahim Salem, the head of the Jihad's military wing in the territories was arrested on Tuesday in Nablus.
Palestinian sources in the city reported that an IDF force encircled several members of the al-Quds Brigades and the al-Aqsa Brigades, Fatah's military wing. It is unclear whether Wednesday's assassination was related to Tuesday's arrest.
Efrat Weiss and Shmulik Hadad contributed to this report