Israeli forces raided the West Bank city of Jenin overnight, carrying out a strike that residents said involved a missile fired from the air and setting off a gunbattle that lasted into Monday morning and killed at least three people.

With the sounds of gunfire and explosives heard across the city hours after the strike and drones clearly audible overhead, the Jenin Brigades, a unit made up of different militant groups based in the city's large refugee camp, said it was engaging the Israeli forces.

"What is going on in the refugee camp is real war," said Palestinian ambulance driver, Khaled Alahmad. "There were strikes from the sky targeting the camp, every time we drive in around five to seven ambulances and we come back full with injured people."

The Israeli military said its forces struck a building that served as a command centre for fighters from the Jenin Brigades in what it described as an extensive counterterrorism effort in the West Bank.

At least six drones could be seen circling over the city but the military declined to specify whether Monday's operations included a drone strike, which had not been seen in the West Bank for more than 15 years until a strike last month killed three militant gunmen near Jenin.

However, the apparent scale of the raid underlined the importance of Jenin in the violence that has surged across the occupied West Bank for more than a year.

Hundreds of armed fighters from militant groups including Hamas, Islamic Jihad and Fatah are based in the refugee camp, which has been hit by a series of major raids by Israeli forces since the start of the year.

As daylight broke on Monday, thick black smoke from burning tyres set alight by residents swirled through the streets while calls to support the fighters rang out from loudspeakers in mosques.

The Palestinian health ministry confirmed at least three people had been killed in Jenin, while another man was killed in the city of Ramallah after being shot in the head at a checkpoint.

The Israeli military said the target functioned as an "advanced observation and reconnaissance centre" and a weapons and explosives site as well as a coordination and communications hub for the militant fighters.

It provided an aerial photograph showing what it said was the target and which indicated the building hit was near two schools and a medical centre.

Only days before last month's drone strike, the army used helicopter gunships to help extract troops and vehicles from a raid on the city, after fighters used explosives against a force sent in to arrest two militant suspects.

The escalating violence in the West Bank over the past 15 months has caused mounting international alarm, with regular army raids in cities like Jenin, a series of deadly attacks by Palestinians against Israelis and rampages by Jewish settler mobs against Palestinian villages.

Israel captured the West Bank, which the Palestinians see as the core of a future independent state, along with East Jerusalem and Gaza, in the 1967 Middle Eastern war. Following decades of conflict, peace talks that had been brokered by the United States have been frozen since 2014.