Palestinian security sources said Patrick Corsi, a 30-year-old member of the International Solidarity Movement, was shot during the weekly demonstration at Kafr Qaddum, west of Nablus.
Eyewitnesses said Corsi, who had participated in last week's protest as well, had been documenting the event with a camera.
Palestinian medics said he was taken to a hospital in Ramallah.
An ISM statement said an Italian activist was "shot in the chest with .22 live ammunition" at the protest, and that his condition was serious but stable.
A Palestinian protester was shot in the hand and chest during the demonstration and was also in stable condition, ISM said.
An army spokesman described the event as a riot during which 100 Palestinians hurled rocks at troops and also burnt tyres.
After failing to disperse people with crowd-control means and "due to increased violence," soldiers "fired small calibre rounds toward main masked instigators," the spokesman said.
Palestinians demonstrate weekly in Kafr Qaddum against the expropriation of land by Israel.
In the West Bank at the Qalandiya crossing between Jerusalem and Ramallah, Israeli border policemen "fired small calibre rounds toward two main instigators' lower extremities" during a violent clash with some 150 Palestinians, the spokesman said.
There was no immediate report on their condition.