The three were jihadi Salafis, or followers of a militant stream of puritanical Islam, and had planned attacks on Israelis and on the Palestinian Authority, the Palestinian self-rule government in the West Bank, said Lt. Col. Peter Lerner, an Israeli army spokesman.
Lerner said the group had started putting together a terrorist infrastructure, including assembling weapons and explosives. He said the cell was the "first substantial indication" of violent activity by jihadi Salafis in the West Bank.
Jihadi Salafis are on the rise in the Gaza Strip, which is run by the Islamic militant Hamas. The trend opposes Hamas as too pragmatic because it has observed cease-fires with Israel and has stopped short of imposing Islamic religious law, or Shariah, in Gaza.
In the West Bank, Israel and the Palestinian Authority of Western-backed Palestinian President Mahmoud Abbas have cracked down on Islamic militants, particularly Hamas. Palestinian security have closed Hamas-linked institutions and arrested hundreds of Hamas activists since the group seized Gaza from Abbas in 2007.
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Lerner said Israeli special forces stopped the car the three were riding in and shot out the tires. He said the men in the car acted suspiciously and that soldiers opened fire, killing two, while the third escaped on foot. The fugitive was later killed in a hideout several kilometres (miles) away, Lerner said.
Palestinians identified the three killed as Mohammed Nairouh, 29, Mahmoud al-Najjar, 23, and Moussa Makhamreh, 22. Palestinian security forces previously had attempted to arrest the three, but they escaped, said Nairouh's brother Obeidallah and al-Najjar's uncle, Taleb.