Israeli troops raided the Freedom Theatre, three months after the theatre's director, Juliano Mer-Khamis, was gunned down by an unknown assailant in the city's refugee camp.
But there was no immediate indication that the operation was linked to the death of Mer-Khamis, an actor who described himself as Israeli-Palestinian and had lived in Jenin for seven years.
The Israeli military confirmed that it had arrested "wanted Palestinians" during an operation in Jenin, but declined to say who it had arrested or why.
Jacob Gough, the theatre's British general manager, named the arrested employees as Adnan Naghnaghiye, one of the managers, and Bilal Saadi, a member of the board of directors.
"Around 3:00 am (0000 GMT), I got a call saying that the Israeli army was at the theatre, that they were throwing rocks at the theatre," he told AFP.
"They got the cement blocks that they use to build houses here, they were breaking them down and throwing them at the building."
"They've damaged quite a lot of the outside of the theatre, quite a few windows were smashed," he added.
An Israeli military spokeswoman declined to comment on allegations that troops had thrown stones at the theatre, saying only "soldiers did not enter the theatre in Jenin."
Gough said he and Jonatan Stanczak, a Swedish co-founder of the Freedom Theatre, tried to drive to the theatre after they were informed of the raid but were stopped by troops who held them at gunpoint on the roadside with a Palestinian family.
"We tried talking to the Israeli army but whenever we tried to talk to them they just said 'shut up, shut up... or we'll kick you'," he said.
At the theatre, troops also briefly detained a staff night watchman and his brother, he said.
"He was made to lift up his shirt, drop his trousers, he was handcuffed along with his brother and then he was escorted to where we were."
The theatre was first established in 1987 by Mer-Khamis's mother, Arna Mer, who wanted to create a space where the children of Jenin could escape the violence of the first intifada which had begun several months earlier.
Fifteen years later, it was destroyed during the second intifada when Israeli troops launched a massive operation against gunmen in the refugee camp -- then a major militant stronghold.
It was rebuilt in 2004 by her actor son Juliano, who was killed in April in the Jenin refugee camp when a gunman opened fire on his car as he was driving home with his infant son and the baby-sitter.
Palestinian police have yet to make any arrests in connection with Mer-Khamis's death. A local man was briefly detained over the murder, but was released shortly afterwards.