The Israeli army said the gunman "opened fire at forces at the scene, injuring three soldiers. In response to the immediate threat, forces shot the assailant."
The Palestinian health ministry confirmed the man had died.
A Palestinian security source identified the gunman as Mohammad Turkman, 25, and said he was a police officer in Ramallah, although that had not been officially confirmed.
Medics reported that one of the wounded was severely hurt with a gunshot wound to his "lower extremities".
The two others "sustained light injuries to their limbs due to ricochet caused by the fire", Israeli rescue service Magen David Adom said.
The Israeli military distributed a picture of what it said was the weapon used, and which looked similar to an AK-47 assault rifle.
A wave of Palestinian knife, gun and car-ramming attacks began a year ago, but the violence has significantly declined in recent months.
Since October last year, the violence has claimed the lives of 237 Palestinians, 36 Israelis, two Americans, a Jordanian, an Eritrean and a Sudanese, according to an AFP count.
Most of the Palestinians killed were carrying out attacks, according to Israeli authorities. Others were shot dead during protests and clashes, while some were killed in air strikes in the Gaza Strip.
Israeli soldiers stand guard near the scene of a shooting attack by a Palestinian assailant at an Israeli military crossing point near the West Bank City of Ramallah
A Palestinian gunman opened fire at Israeli soldiers on the outskirts of Ramallah in the occupied West Bank on Monday, wounding three of them before being shot dead, officials said.
