The Israelis are investigating whether three soldiers killed in a gun battle with Islamic militants on the West Bank on Saturday were shot by their own comrades.

The Israelis are investigating whether three soldiers killed in a gun battle with Islamic militants on the West Bank on Saturday were shot by their own comrades.

They were members of an undercover unit searching for Hamas fugitives in the village of Asirah ash Shamaliyah, which is under Palestinian civilian rule but Israeli security supervision.

Their main target was Mahmoud Abu Hanoud, who tops the "most-wanted" lists of both the Israeli and Palestinian security services. The Israelis had been told he was in the village.

The gunman, who is suspected of masterminding two suicide bombings that killed 21 Israeli civilians in Jerusalem three years ago, escaped to Nablus, two miles away.

He was treated in hospital for minor shoulder wounds, then handed himself over to the Palestinian police, who placed him under heavy guard.

The Israeli troops captured Nidal Daglas, another Hamas operative, who was with Abu Hanoud at the time of the shooting.

Major-General Yitzhak Eitan, the chief of Israel's central command, which includes the West Bank, said that the incident began around 10pm on Saturday, when a force that was combing Asirah ash Shamaliyah house-to-house came under fire from the roof of Nidal Daglas' home.

Military sources said the original search team, from the undercover Duvdevan ("Cherry") unit, numbered fewer than 100 men, but it was quickly reinforced when the exchanges of fire intensified.

The shooting lasted a few minutes. The hunt for other gunmen continued into the morning.

Three Israeli sergeants, all aged 20, were killed and a fourth wounded in the army's bloodiest day on the West Bank since nine soldiers were shot dead in Palestinian riots four years ago.

The army chief of staff, Lieutenant-General Shaul Mofaz, said he could not rule out the possibility that the men were hit by "friendly" fire. Something, he said, went very wrong. A committee is to investigate. Palestinian officials blamed Israel for not co-ordinating the raid with their security services.

Asirah ash Shamaliyah is a hotbed of Hamas resistance. During the fighting residents defied an Israeli curfew, throwing stones, and burning tyres. Dozens were arrested, and Nidal Daglas' house was demolished. Abu Hanoud's mother said: "Oh God, protect my Mahmoud. The Palestinian Authority hunts him, the Jews hunt him, and the collaborators. God be with him. For four to five years he did not come here. Why did he come today?"

Israel's Deputy Defence Minister, Ephraim Sneh, said: "The most important thing is that Abu Hanoud was neutralised and taken out of the cycle of terror." The operation, the minister added, saved many Israeli lives.

On past performance, the Palestinian Authority will not extradite Abu Hanoud to Israel, just as the Israelis do not hand over Jews who murder Palestinians. He was the most senior commander of the military wing of Hamas still at liberty on the West Bank.

As well as the September 1997 attacks in Jerusalem's Mahaneh Yehuda market and the Ben-Yehuda shopping and cafe mall, he is believed to have planned bombings in the northern Israeli towns of Haifa, Tiberias and Netanya, which were abortive. The Israelis suspect he was also behind an explosives factory uncovered in Nablus earlier this year, a recent attack on the Elon Moreh settlement, and a number of shootings at Israeli vehicles travelling through the West Bank.

Four of the five young Palestinians who blew themselves up in Jerusalem were recruited from Asirah ash Shamaliyah. According to Israeli intelligence reports, Abu Hanoud was to have joined them in the second suicide operation, but changed his mind at the last minute.

His arrest comes when Israeli troops and police are on heightened alert against Hamas attacks designed to sabotage the chances of an Israeli-Palestinian peace agreement. It will be harder for the militants to succeed without him, especially after the death or detention of four other high-level Hamas commanders in the West Bank and Gaza over the past two years.

But Israel is not lowering its guard. General Eitan said yesterday: "If anyone thinks that the war against terrorism is over, he does not understand the situation. Hamas will not cease its attempts to carry out attacks in Israel and the West Bank."