The building, owned by Latifa Abu Hmeid, is located in the Amari refugee camp near the occupied West Bank city of Ramallah.
According to an Anadolu news agency reporter based in the area, Israeli soldiers raided the camp early Saturday, surrounding the building before bringing it down in a controlled demolition.
Before razing the four-storey structure, the army evicted dozens of journalists and solidarity activists who had been inside the building in a bid to prevent its destruction.
Israel accused one of Abu Hmeid's sons of killing an Israeli soldier in May.
Protesters called the destruction a form of collective punishment.
ollowing the demolition, confrontations broke out between local residents and Israeli troops, with the latter using tear gas, rubber-coated steel bullets and live ammunition to disperse the crowds.
At least 56 Palestinians have been injured in the protests against the demolition.