Israel has not officially said that it carried out the killing.
But Israeli Prime Minister Ariel Sharon's office released a statement shortly afterwards, saying Hamad had been responsible for directing the suicide attack at a Tel Aviv disco in June that killed 22 people.
Israel army radio, quoted by the AFP news agency, said the killing, in the town of Qalqilya, was carried out by an elite army unit.
Palestinian information minister Yasser Abed Rabbo told Voice of Palestine radio: "This is a crime and means the Israeli promises for calm are mere lies and we cannot trust them."
A BBC correspondent in Jerusalem says it looks like a revival of Israel's policy of targeting suspected militants it says are plotting attacks.
Israel had agreed to suspend such killings as part of a ceasefire introduced as a result of international pressure.
The Israeli cabinet is due to meet on Sunday to debate the easing of tough security restrictions that limit Palestinian movements.
On Monday, Palestinian leader Yasser Arafat is to visit London for talks on the Middle East peace process with UK Prime Minister, Tony Blair.
Mr Blair has stressed the importance of progress being achieved towards a settlement.
