The army also stated that those involved “threw stones and attacked the security forces”.
During the chaos, a pair of masked settlers attacks a Border Police officer with pepper spray, according to the Times of Israel.
The officer allegedly responded by opening fire, seriously wounding both of their assailants.
Investigators from the Justice Ministry's Police Investigations Department came to the scene to collect evidence, Channel 12 reported.
The Department later confirmed that the officer was questioned in connection with the shooting. They were then released to house arrest and barred from all police facilities for eight days.
Likewise, the IDF confirmed that troops and Border Police had been sent to the area and had successfully dispersed the rioting.
Images of the aftermath of the unrest show vehicles burnt out and left abandoned in the streets, while a number of homes were also destroyed.
However, there are no reports of any arrests thus far related to yesterday’s unrest, though two suspects were detained by the IDF for engaging in rioting the previous night.
According to Reuters, one Palestinian was treated for a head injury while others received attention after inhaling tear gas.
Israel's Magen David Adom (MDA) medical emergency response group said it evacuated two seriously wounded Israelis to Meir Medical Center in Kfar Saba. One of the victims was listed as being in critical condition.
One of the shooting victims was transferred to Rabin Medical Center's Beilinson Hospital in Petach Tikvah overnight for surgery, Meir Medical Center said in a statement on Tuesday. He remains in serious condition.
The disorder comes in the wake of Israeli Defence Minister Israel Katz’s decision to release all West Bank settlers being held in administrative detention on suspicion of terrorism and violence against Palestinians.
Katz tied the announcement to the release of Palestinian prisoners as part of the ceasefire deal, saying: “[It] conveys a clear message of strengthening and encouraging the settlements, which are at the forefront of the struggle against Palestinian terrorism and face growing security challenges.
"It is better for the families of Jewish settlers to be happy than the families of released terrorists.”
The International Court of Justice, the UN’s highest court, ruled last year that the West Bank settlements are illegal under international law, a position shared by the UK Government.