HEBRON, West Bank -- Two off-duty Israeli soldiers hiking in the West Bank were killed Friday by Palestinian gunmen but before they died, they managed to fire back at their assailants and kill one of them, the military said.

A second Palestinian assailant was seriously wounded in the firefight, the army said.

A woman who was with the two Israelis but escaped unharmed told Israel Radio they had been hiking in the hills outside the Palestinian town of Hebron and not far from the Jewish settlement of Kiryat Arba where all three lived. They were approached by a jeep carrying a group of Palestinian gunmen who fired at them, said the woman, who was not identified.

The army confirmed her account and said the two Israelis, who were both in their 20s, returned fire with assault rifles they were carrying before they died. They killed one of their attackers and wounded another, the army said.

Palestinian security officials confirmed one Palestinian died in the clash.

The apparent ambush came hours after troops killed a bodyguard for the Palestinians' chief negotiator in the West Bank town of Ramallah, but there was no indication the two events were connected.

The Al Aqsa Martyrs' Brigades militant group later claimed responsibility for the attack on the Israelis in a news conference in the Gaza Strip. The group described it as an act of revenge for the killing of Islamic militants there by the Israeli military.

Witnesses who arrived at the site in the aftermath of the Hebron clash said they saw a jeep, apparently used by the attackers, riddled with bullet holes and spattered with blood being towed away for investigation. They said Israeli troops and Palestinian police were working together at the scene.

About 500 Jewish settlers live in heavily guarded enclaves among some 160,000 Palestinians in Hebron and clashes between the two sides are frequent.

The shooting was the first fatal attack on Israelis since Israel and the Palestinians formally relaunched peace talks at a U.S.-hosted Mideast summit last month. It brought a call from settler leaders for Prime Minister Ehud Olmert to shelve a proposal to ease criteria for release of Palestinian prisoners.

A statement from the Yesha settlers' council blamed the attack on Olmert's recent initiative to seek cabinet approval for the release of Palestinians involved in failed attacks on Israelis -- an effort to trade them for the release of an Israeli soldier captured by Gaza militants in June 2006.

"The irresponsible policy of releasing terrorists causes terror to rear its head," the council said.

Also on Friday, an official in Olmert's office said he has issued a new directive to all government ministries requiring his approval for construction of housing for Jewish settlers in the West Bank.

Several lower-level bureaucratic decisions this month to move ahead with such construction caught Olmert off guard and angered the Palestinians and the United States just as Israel and Palestinians were renewing U.S.-brokered peace talks.

The official in Olmert's office, speaking on condition of anonymity because the decision had not yet been officially announced, said the directive did not apply to east Jerusalem which Israel annexed in 1967 but which is claimed by the Palestinians as the capital of their future state.

Israeli government spokesman Mark Regev said Friday that Olmert has not called off plans to build the new homes in Har Homa, and has not ordered a halt to all construction in West Bank settlements.

Israel will not confiscate land for new settlement construction and will not "outwardly expand" its West Bank settlements, Regev said, meaning that construction can continue inside the settlements' existing borders. Israel also has canceled financial incentives designed to persuade Israelis to live in the West Bank, Regev said.

"But in the Israeli perspective, the West Bank is not Jerusalem and Jerusalem is not the West Bank," he said.

In an overnight raid in Ramallah, Israeli forces shot and killed a bodyguard for Ahmed Qureia, the chief Palestinian negotiator in the peace talks which were relaunched after a violent hiatus of seven years.

Israel has been limiting its operations in the West Bank, ruled by Palestinian President Mahmoud Abbas, as it negotiates a peace agreement with Abbas's moderate government. On Thursday, Qureia announced that peace talks would continue after a spat over Israeli settlements.

But late Thursday, the Israeli military sent a team into a suburb of Ramallah, the seat of Abbas' government, to arrest one of Qureia's bodyguards, a member of the Palestinian security forces whom the military said was implicated in armed activity against Israel and had provided weapons to other militants. He opened fire at troops and they fired back, killing him, the military said.

Palestinian security officials denied the 23-year-old bodyguard fired at troops.

Qureia, a former Palestinian prime minister, condemned the operation. Israel is trying to hinder progress in talks "by doing the opposite of its commitments and pledges to the international community, the most dangerous of which is the continuous assassinations of Palestinian fighters," he said in a statement Friday.