The military said its forces entered the West Bank village of Yatta to knock down the family residence of Morad Bader Abdullah Adais. The military says he killed Dafna Meir, a mother of six, in her home in the Jewish settlement of Otniel in January. He fled the scene and was later arrested.
Israel says it carries out housing demolitions to deter future attacks. The Palestinians consider it a form of collective punishment.
On Wednesday, however, two Palestinians from Yatta opened fire in Tel Aviv's Sarona district, a popular shopping and restaurant area, killing four Israeli civilians.
The military arrested several people in connection to that attack, froze 83,000 Palestinian travel permits to Israel and imposed checkpoints to restrict movement in and out of the village where the Palestinian gunmen were from.