The Palestinians slammed the operation as an "outrageous aggression," warning that it could undermine stability in the region, and appealed to the international community to intervene.

Israeli troops in dozens of jeeps and armoured vehicles rolled into the centre of town early on Sunday, imposing a curfew and surrounding several buildings and two hospitals, in what the military said was an operation to find weapons caches and arrest wanted militants.

It was the largest Israeli military operation in the occupied West Bank since January 4, when four Palestinians were killed during a raid in Ramallah, and the largest in Nablus in seven months.

Four Palestinians were lightly wounded by rubber bullets in the clashes, medics said. The army said two soldiers were also lightly wounded.

"There were brief exchanges of fire and our forces also used rubber bullets and tear gas to disperse Palestinian demonstrators who had thrown rocks at them," an army spokesman said.

In what Israeli army radio called an "unlimited" operation, troops continued to conduct house-to-house searches in the early afternoon, arresting 20 people, Palestinian security sources said.

The streets in Nablus's old city remained deserted, with many blocked, as residents remained indoors, witnesses said. Shops were shuttered and schools closed. Sounds of occasional explosions were heard throughout the day.

The army had distributed flyers in the town saying the raid was aimed at arresting nine wanted people, security sources said.

"Our forces are operating in Nablus to discover caches of arms and explosives and to arrest those responsible for attacks against Israel."