Israeli media reported that around 3am, the occupation security agency "Shin Bet" received intelligence that Jarrar was hiding in a complex of buildings in the village of Yamoun, 9 kilometers west of Jenin, in the West Bank.
Jarrar is the third person to have been killed in the aftermath of the settlement attack; last month security forces raided a house and killed Jarrar's cousin, Ismail Muhammed Jarrar.
Since the Haft Gilad shooting attack on January 9, Israeli forces have intensified military activity in the north of the West Bank in search of the assailants.
Past attempts by Israeli authorities to dismantle Havat Gilad have led to clashes with settlers there.
The decision to retroactively approve the 50-family village of Havat Gilad will "allow the continuation of normal life there", Israeli Prime Minister Benjamin Netanyahu said during a cabinet meeting on Sunday, according to Reuters. "I hope that we will soon have our hands on the murderer of Rabbi Itamar Ben Gal", he tweeted.
Hamas's military wing, the Izz ad-Din al-Qassam Brigades, on Tuesday claimed that Jarrar was one of its operatives.
Israeli Defense Minister Avigdor Lieberman congratulated the army for what he called "the successful operation", that resulted in Jarrar's death.
Two Palestinians have been killed during earlier raids which Israeli security services said were launched to find Shevah's killers.
Footage of the raid when Israeli forces killed Ahmed Nasser Jarrer. But the militant Palestinian Islamist movement Hamas called it a "continuation of the resistance" to the controversial USA decision to recognise Jerusalem as Israel's capital.
Havat Gilad is made up of lands privately owned by Jews, undeveloped lands that belong to the state and undefined land in the West Bank area which Israel captured in the 1967 Six-Day War.
Valent said, according to Days of Palestine: "The conditions it faces also represent those of many Palestinian communities have created a coercive environment that violates the human rights of residents and generates a risk of forcible transfer".