Israeli officials say the ambush Friday occurred as a group of Jewish settlers accompanied by Israeli soldiers left Jewish Sabbath services at the Tomb of the Patriarchs holy site. The site is believed to be the burial cave of the biblical figure Abraham.
Witnesses say a long gunbattle between Palestinians and Israeli soldiers erupted after the incident, making it difficult for the Israeli rescue service to evacuate the wounded.
About 450 Jewish settlers live among 130-thousand Palestinians in Hebron under heavy Israeli guard.
In other developments, reports say Israeli troops killed a wanted Palestinian militant near Jenin. Israeli Radio reported the man tried to flee when troops attempted to arrest him.
Earlier, a teenage Palestinian stonethrower was killed by Israeli gunfire in the West Bank city of Nablus. The army said Israeli troops opened fire after the demonstrators threw an explosive device.
Meanwhile, new public opinion polls in Israel show Prime Minister Ariel Sharon with a commanding lead over Foreign Minister Benjamin Netanyahu in their battle to lead the ruling right-wing Likud party.
A survey in the Yedioth Ahronoth daily shows Mr. Sharon beating his rival 54 to 38 percent in primary elections set for November 28th.
Both men are known for their hardline positions and policies against the Palestinians.
In the race for the Labor Party leadership, a poll conducted for the Ha'aretz newspaper shows the mayor of Haifa, Amran Mitzna, holding a big lead over former defense minister Benjamin Ben-Eliezer.
The new elections were called after Labor left Mr. Sharon's ruling coalition during a budget dispute.