The soldiers shot and killed the assailant near the Palestinian village of Teqoa, which is also near the Israeli settlement of Tekoa in the Gush Etzion bloc of the West Bank, according to the Israel Defense Forces.
The violence came amidst heightened tensions in the region, sparked by new security measures that Israel has implemented in Al-Aqsa mosque compound, one of East Jerusalem's most sensitive holy sites.
Three Palestinians were killed and hundreds wounded in the clashes in Jerusalem and the West Bank.
Eyewitnesses said that the Israeli army closed the area prohibiting anyone from entering the scene. The official provided no further details on the victims.
The protests - over the placement of metal detectors and turnstiles at the site - turned into clashes in which the three men were shot dead, the interior ministry said.
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A 20-year-old Palestinian man, called Omar el-Abed, reportedly infiltrated the Jewish settlement and stabbed at least four settlers, three of whom died and the fourth was injured.
Israel Radio identified the attacker as a 19-year-old Palestinian from the West Bank village of Khobar near Ramallah.
The attack follows clashes between Palestinians and Israeli security forces over the Israeli government's decision to keep in place indefinitely metal detectors at the entrance to the Temple Mount.
The attack comes amid increasing unrest in Jerusalem with the spiritual leader of al-Aqsa Mosque warning on Thursday of an "explosion" over the control of access to the city's holiest site, the Noble Sanctuary.
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