One of the parents escorting the group said they opened fire out of self-defense.
The border violence comes a month after Israel detonated a tunnel leading from Gaza into its territory, killing 12 people, among them militants from the Iranian-backed Palestinian Islamic Jihad group and Hamas, which rules the Gaza Strip. It said train service in southern Israel was briefly halted after the mortar attack.
According to Ghassan Daghlas, a Palestinian Authority official who monitors settlement activity in the northern West Bank, Israeli soldiers took Odeh's body into custody as it was being taken to a hospital in the city of Nablus.
They identified him as Mahmoud Odeh, 48, and said he was shot in the chest.
Kusai Abed Almanam, a member of the regional council of Qusra, told Haaretz that the Palestinian killed in the altercations with Israeli settlers "is known in the village as a farmer who often tends to his land".
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But the Israeli military claims that Odeh was shot after "throwing stones" and "lightly wounding two settlers", during the confrontation.
The military said that a medical team rushed to the scene to offer medical care to the Palestinian.
According to human rights activists, the slain Palestinian was working in his field when he was shot, and the mob only arrived at the scene later. The IDF said it opened an investigation into the incident.
The BBC's Tom Bateman in Jerusalem says tensions between settlers and Palestinians in the occupied West Bank have been on the rise. Several isolated hard-line settlements are in the area, situated near Palestinian villages and Nablus.
According to official Palestinian figures, more than 6,300 Palestinians are now being held in detention facilities throughout Israel. Israel says a lot of them were attackers and that others died in clashes with Israeli forces.