Israeli troops were scouring a village near the southern West Bank city of Hebron on Tuesday, residents said, a day after a gunman killed an Israeli nearby.
The incident at the start of the Jewish Passover holiday on Monday was the first deadly attack on an Israeli in the occupied West Bank since the start of the year, and came as tensions were soaring over the near-breakdown of US-brokered peace talks.
The army was searching several houses and businesses close to where the incident took place southwest of Idhna, a village outside Hebron, residents told AFP.
Army roadblocks set up the night before around Idhna were still in place, they said.
The army said it was "conducting widespread searches for the perpetrators" of the attack.
The man who was killed was a police officer from the town of Modiin in central Israel, an Israeli security source told AFP on condition of anonymity.
The policeman's wife and nine-year-old child were wounded and transferred to hospital. Three other children were in the vehicle, according to Israeli military radio.
Israelis in another car said they saw a man wearing a helmet and firing a Kalashnikov assault rifle on the side of the road, it said.
The Palestinian Hamas movement ruling Gaza, and fellow Islamist movement Islamic Jihad praised the attack, linking it to recent unrest in the flashpoint Al-Aqsa mosque compound in Jerusalem, where five Palestinians were arrested by Israeli police on Sunday.
But neither group claimed responsibility for the attack.
The flashpoint city of Hebron is home to nearly 200,000 Palestinians. There are some 80 settler homes in the centre of town housing about 700 Jews who live under Israeli army protection.