Salah Barghouti carried out the December 8, 2018 attack at Ofra junction that left seven people wounded.
Among the victims was Shira Ish-Ran, a seven-month pregnant woman who was forced to deliver her baby boy prematurely after she and her husband Amichai were shot.
The baby boy, named Amiad Israel, only survived three days.
Hamas later confirmed that Barghouti was behind the attack. The terrorist was shot dead five days after the attack by Israeli troops.
The Wednesday morning demolition at the village north of Ramallah was carried out by IDF soldiers, in cooperation with the Border Police and the Civil Administration.
The home of Barghouti's brother Asam, the commander of the terror cell behind the Ofra shooting and a deadly attack on IDF soldiers days later, was demolished in March.
Two IDF soldiers First Sgt. Yuval Moryosef, 21, from Ashkelon, and Sgt. Yosef Cohen, aged 19, from Jerusalem, were killed in the attack at Givat Assaf junction.
Asam Barghouti was arrested at the home of one of his associates in the village of Abu Shahidam, close to his own village.
According to Israeli security forces, Asam Barghouti was busy preparing for further attacks. A Kalashnikov rifle, ammunition and night vision equipment were seized during his arrest.