The army confirmed the death of Mohammed Khatib, 24, in custody but said he had not resisted arrest.
The victim, Ari Fuld, 45, was well-known amongst settlers as a pro-Israel advocate. According to his Twitter account, he had planned a lecture tour in the United States in November.
Israel's top court on Wednesday upheld an order to raze a Palestinian Bedouin village in the occupied West Bank, after debating petitions challenging the decision.
Footage distributed by the military showed an armoured bulldozer tearing into the one-storey structure in the village of Kaubar, north of the Palestinian city of Ramallah.
The 10.5 tonnes of mail had been held in Jordan since 2010 because Israel would not permit direct transfer to the Palestinian Authority in the West Bank.
The teenage attacker snuck into the settlement on Thursday evening, the Israeli army said, stabbing three people before being shot dead.
Israel's Supreme Court has temporarily blocked the demolition of a Palestinian Bedouin village in the occupied West Bank, a lawyer for residents said Friday, following growing international concerns over the move.
The Palestinian government has temporarily banned public protests, it announced Wednesday, ahead of a planned demonstration in the occupied West Bank opposing punitive measures against Hamas-run Gaza.
Israeli security forces on Tuesday began evicting Jewish settlers from 15 homes which Israel's highest court ruled were built illegally on privately-owned Palestinian land in the occupied West Bank.
Israeli occupation forces has injured dozens of Palestinians including a child by tear gas during clashes with the Israeli forces in the West Bank town of Beit Ummar.
The Israeli military shot dead a Palestinian during a raid in the occupied West Bank on Wednesday, saying a soldier fired back after a man pelted him with a rock.