An Israeli soldier killed in the West Bank on Monday night was shot by his comrades, in an incident in which a Palestinian driver was also shot dead.
The taxi driver accelerated when told to stop, soldiers said
Initial reports said Palestinian taxi driver Iyad Dueik had run over Sgt Tsiki Eyal at a surprise roadblock.
Troops opened fire at Mr Dueik's car, hitting him seven times and hitting Sgt Eyal in the head with a single shot.
The army is investigating whether Sgt Eyal was killed from the gunshot or by being hit by the taxi.
No Israeli soldiers have been killed in the occupied territories since January, as an informal militant truce has held.
Mr Dueik, 30, was unarmed and was not known to have links to militant groups.
He died of his wounds after being taken to hospital in Hebron, a flashpoint town where about 500 Jewish settlers live under heavy military protection in a city of 150,000 Palestinians.
Israeli media reports say it is not clear if he meant to harm the soldier, to escape, or whether he just made a fatal error of judgement in the dark.
Palestinian officials in Hebron quickly played down suspicions of a political motive.
The Israeli army has been on high alert in the area as thousands of Jews visit a holy shrine during the Passover holiday.
Jewish settlers on Tuesday officially opened a five-storey block of flats in the Tel Rumeida neighbourhood which has previously been occupied by settlers in mobile homes.
Some of the families moving into the building had lived in the mobile homes while others are newcomers to the city, reports said.
"Blessed be the Hebron heroes," Israeli parliament speaker Reuven Rivlin told crowds who had gathered for the ceremony.
The new building contains seven flats and a study hall
"Thank God that he has brought us back to our land and allowed us to build here despite the opposition."
The Palestinian governor of the Hebron area said the building in the Israeli-occupied heart of the city would exacerbate the situation in the tense city.
Latest developments put further pressure on a de facto ceasefire that Palestinian militant groups are adhering to after four-and-a-half years of violence.
Several Palestinians have been killed by Israeli forces since Palestinian leader Mahmoud Abbas agreed the ceasefire with Israel more than two months ago.
A Palestinian militant splinter group killed five Israelis in a night club bombing in Tel Aviv on 25 February.