The army said it prevented a "terror attack against Israeli civilians" and that the gunmen carried an M16 rifle and a handgun.
It did not elaborate on the target of the alleged attack on Friday.
There was also no word on the identities of the two dead and those injured.
A few hours later, Israel ordered the army to prepare for a full closure of the West Bank.
The office of Prime Minister Benjamin Netanyahu said it instructed security forces to immediately cordon off the city of Hebron and prepare to fully close all of the West Bank, starting Friday.
The deadly shooting comes as Israeli voters will decide next Tuesday whether to grant Netanyahu yet another term as prime minister - or usher in a new era of Israeli politics.
The election comes three years after the Hamas-led attacks on Israel that triggered the war in Gaza.
Israel's government has warned of potential attacks by the country's "enemies" in the lead-up to the election.
Following the shooting, Netanyahu held an emergency meeting of his security cabinet and officials from top military and security agencies.
He blamed Hamas, saying the militant group was "planning a major attack aimed at murdering innocent civilians".
"Our brave soldiers thwarted this attack with courage and determination," he said, without elaborating on what the planned attack entailed.
"I commend them for their actions and wish our wounded a speedy recovery," he said, but did not say if the wounded were soldiers or civilians.
Earlier on Friday, Israel's far-right national security minister Itamar Ben-Gvir, known for extremist views, said that the attack shows that Israel needs to restrict the Palestinians' freedom of movement in the West Bank.
"The lives of the residents of Judea and Samaria, of the settlers, the lives of the soldiers, the lives of the police officers, the lives of our fighters are a million times more important than freedom of movement," he said, using an Israeli reference to the West Bank.
Before the anniversary of the October 7, 2023, Hamas-led attack that triggered the war, Netanyahu said the Palestinian militant group could attack Israel in a bid to influence the outcome of the elections.
He did not provide evidence to back up the claim.
Emergency responders said five people were injured, some critically, and were being evacuated to hospitals in Israel.
A statement from the responders said gunfire was still ongoing as they arrived at the scene of the attack near the Yehuda Junction in the morning.
Two men in their 20s had gunshot wounds to their lower limbs, one was unconscious and seriously injured, the responders said.
An investigation was under way, authorities said.
Also on Friday, the army said soldiers and Israeli security and intelligence agencies conducted dozens of operations in the West Bank and apprehended dozens of people, including those affiliated with Hamas and Islamic Jihad militant groups.
It also said it had found weapons, including M16 rifles and submachine guns.
Closures of the West Bank, such as the one ordered on Friday, are growing more common in the territory.
It's the fourth time in the past month that Israel has imposed restrictions across the area, shutting gates and checkpoints connecting Palestinian villages to major roads.
Israeli roads in the territory remain open to Israeli drivers, including settlers, who can still travel through the area but might face delays.
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