Palestinian police opened fire on Israel Defense Forces soldiers riding in an ice cream truck in the West Bank on Thursday, a Palestinian security source said, in a shootout that left two Israelis and a Palestinian wounded.

The overnight gunbattle appeared to be the latest instance of Israeli undercover forces clashing accidentally with increasingly active Western-backed Palestinian security forces.

Israel's military command confirmed the soldiers were lightly wounded in the incident in the West Bank town of Qalqilya, and said troops had arrested 26 Palestinian suspects in armed raids across the occupied territory early on Thursday.

A senior Palestinian security source said police opened fire at the truck after it ignored orders to halt.

"Then the Israeli soldiers opened all the doors and shot at our guys," the source told Reuters, adding that a Palestinian policeman was wounded.

Israeli forces had not coordinated any military activity with the Palestinians, as they customarily do, the source said.

Palestinian security forces controlled by Western-backed Palestinian President Mahmoud Abbas have been increasingly patrolling the streets in West Bank towns, where Israel also continues to carry out raids in pursuit of suspected militants.

Tensions have risen recently in the West Bank, a territory captured by Israel in a 1967 war. Israeli soldiers killed an unarmed Palestinian in the town of Hebron at a security checkpoint at the site of a biblical shrine this month.