A three-year-old Palestinian boy shot by Israeli forces in the occupied West Bank last week died of his wounds on Monday, Israeli and Palestinian officials said.

The Israeli Sheba hospital, where he was being treated since he was shot on Thursday, said the child "died... despite extensive efforts of the medical team".

In a statement, the Palestinian health ministry said it was informed of the "death of the child Mohammed Haitham al-Tamimi, 3, from the village of Nabi Saleh."

In a statement released soon after confrontations in the village near Ramallah, the Israeli army said that "assailants fired in the direction of the community of Neveh Tzuf", a settlement just south of Nabi Saleh.

Soldiers stationed nearby "responded by firing a number of bullets", the statement said.

As a result of the army's fire two Palestinians were wounded, one of whom was the three-year-old, it said.

The army added that it "regrets harm to non-combatants and is committed to doing everything in its power to prevent such incidents".

Tamimi was taken to Sheba by helicopter for treatment. His father, Haitham al-Tamimi, was also wounded in the incident.

On Monday, the child's body was handed to a hospital in Ramallah, ahead of his Tuesday funeral.

Laila Ghannam, Governor of Ramallah and Al-Bireh, called the shooting "a double crime".

"If it were not for God's grace, there would have been two funerals today in this place," she said.

Haitham had recounted the shooting late on Thursday.

"I was with my child in my car, we wanted to visit family," the 40-year-old said.

"Suddenly they shot at me and my son, I thought it came from the (military) tower," he added. (AFP)