It happened near the village of Huwara - which has been the scene of previous deadly attacks on Israelis and rampages by Jewish settlers in retribution.
The shooting took place at a carwash.
The gunman is said to have approached on foot and opened fire with a handgun.
The Israeli ambulance service said the two men aged 28 and 60 were pronounced dead at the scene. Both are said to have been civilians from Ashdod in southern Israel.
Israeli media reported that they had come to the West Bank to fix their car and spent several hours in Huwara.
They say that the attacker spoke to them briefly - maybe to check if they were Jewish Israelis - before shooting them at point blank range.
The weapon was apparently found in a nearby field, and the suspect is still thought to be in the area.
The Israeli military has set up blockades nearby and is hunting for the gunman. It is also said to be on alert for reprisal attacks.
The Palestinian militant groups Hamas and Islamic Jihad praised the deadly shooting.
Hawara has long been a flashpoint in the West Bank. It is located on a main road south of Nablus, which is mostly used by Palestinians and Israeli settlers.
In the past, Israelis would sometimes shop there and come for services, which are often cheaper in Palestinian areas of the West Bank. But that has become uncommon after a recent surge in violence.
This year, the village has seen several shooting attacks in which Israeli settlers and soldiers have been targeted - including the killing of two brothers in February.
That triggered a deadly rampage by a large crowd of settlers in one of the worst such acts in years. There have also been other instances of settler violence.