Nabus was the last West Bank city to be reoccupied
The advance came after Israel consolidated its hold of the Palestinian areas it had seized early on Wednesday - Jenin and Salfit.
In Bethlehem, Israeli soldiers are still surrounding the Church of the Nativity, where more than 100 Palestinian police and militiamen have taken refuge.
Until nightfall on Wednesday, Nablus had been the only major West Bank city not to have been reoccupied.
As Israeli tanks that had encircled the town all day began to move in, witnesses reported hearing gunfire and explosions.
One woman was killed by a blast that shook the city, Palestinian sources said.
Palestinians and police were moving through the streets and some main roads had been blocked with makeshift barricades.
Amid growing calls for an Israeli withdrawal, United Nations staff have accused Israeli forces of wanton destruction in areas they have occupied.
Symbolic gesture
The UN Security Council and the EU have held separate meetings to discuss the crisis.
EU foreign ministers agreed to send an urgent high-level diplomatic mission to Israel and the Palestinian territories to help calm the growing conflict.
"This is the most dangerous conflict in the world," British Minister for Europe Peter Hain said.
Egypt has said it is suspending contacts with Israel apart from diplomatic channels which could help the Palestinians.
An Israeli official dismissed the move as a symbolic gesture.
In another development, reports from southern Lebanon say that the militant group, Hezbollah, has for a second day fired anti-tank missiles and mortars at Israeli army posts in a disputed border zone.
Palestinian gunmen are among about 200 people believed to be taking refuge inside the famous Church of the Nativity, with Israeli soldiers outside.
Priests, nuns and civilians are also among those besieged.
US diplomatic security agents evacuated a group of foreign nationals, including nine Americans and several Britons from a hotel in the centre of Bethlehem, a State Department official said.
Five Italian journalists and an Armenian colleague were also brought out of the town's Franciscan convent by Italian diplomats, the foreign ministry in Rome said.
Bethlehem and Ramallah - where Palestinian leader Yasser Arafat is still holed up in his offices surrounded by Israeli troops - have both been declared closed military areas.
The BBC's James Reynolds, who is in Bethlehem, said that the streets were deserted and strewn with rubble, glass and broken water pipes.
Our correspondent says that most people are still staying at home, too afraid to move.
Three Palestinian gunmen and at least four non-combatants are reported to have been killed in Bethlehem.
The sixth day of Israel's Operation Defensive Shield - which it says is a response to repeated suicide bombings - began with tanks sweeping into Jenin and Salfit.
Israel had already reoccupied Bethlehem, Ramallah, Tulkarm and Qalqilya.
The Israeli action has brought strongly-worded criticism from the Vatican.
The Pope "rejects unjust conditions and humiliations imposed on the Palestinian people as well as the reprisals and revenge attacks which do nothing but feed the sense of frustration and hatred," the statement said.