Palestinian officials confirmed the death of 29-year-old Naim al-Najjar and 35-year-old Anwar Abed Rabbo on Sunday.
An Israeli police official claimed that the settler, a truck driver, opened fire on the two victims after they tried to attack him.
Najjar and Rabbo lived in the Yatta area, about 8 kilometers (5 miles) south of al-Khalil.
Illegal Israeli settlers often assault the Palestinians or vandalize their properties in the occupied territories.
About 500,000 Israelis live in more than 120 settlements built since the 1967 Israeli occupation of the Palestinian territories of the West Bank and East al-Quds (Jerusalem).
On June 11, Israeli settlers damaged several Palestinian cars in East al-Quds.
The Sunday shooting took place more than two weeks after the Tel Aviv regime returned on May 31 the remains of 91 Palestinians killed by Israeli forces over the past 35 years.
The remains of 11 bodies were received in the Gaza Strip and those of the other 80 were transferred to the West Bank city of Ramallah.
HSN/PKH/MA