The victim was hit in the head by live fire, the ministry said, in the flashpoint town of Beita, scene of regular demonstrations against Israeli settlement expansion, which often degenerate into clashes.
A family member identified the dead man as Mohammed Ali Khabisa, 27.
He was taken to hospital in the northern West Bank city of Nablus where he died shortly afterwards, the ministry said.
Another eight Palestinians were wounded by rubber-coated bullets, the Palestinians' official Wafa news agency reported.
The Israeli military had no immediate comment when contacted by AFP.
Beita residents have been demonstrating since May against the wildcat Jewish settlement outpost of Eviatar set up nearby without Israeli permission.
The outpost was evacuated in early July but Israeli army troops remain stationed there while authorities deliberate on its fate.
If the settlement is approved, its founders will be allowed to take up residence more permanently.
Beita's residents have vowed to continue their campaign until the army too leaves the outpost.
Several protesters have been killed and hundreds wounded in clashes with the Israeli security forces since May.
Israel occupied the West Bank in the Six-Day War of 1967 and all Jewish settlements in the territory are considered illegal by most of the international community.
Almost half a million people live in Israeli settlements in the West Bank, alongside 2.8 million Palestinians.
