Two Israelis were critically injured and later died of their wounds in the attack that took place in an industrial area near the settlement of Barkan in the central West Bank, according to the Israeli Broadcasting Corporation.
A spokesman for the Shin Bet said they had arrested Naalwa's brother, while his sister was "detained, questioned and released", declining to provide further details.
The woman, 54, was taken to hospital, where her condition was stabilised.
One of the victims was identified as Kim Yehezkel, a 28-year-old mother of an infant son who worked in the office that was attacked.
But other workers in the industrial zone suggested the attack was carried out by a disgruntled employee and was not politically motivated. "We know he is still armed and considered unsafe", he added.
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The army called the shooting a "terrorist attack", adding however that other unspecified factors were involved. "I was very surprised by what happened; there was no sign he was planning such a thing", he was quoted by the paper as saying.
The Palestinian Islamic Jihad group called the attack a "natural response" to Israeli crimes in Gaza, Jerusalem and Khan al-Ahmar, a Bedouin village in the West Bank slated for demolition.
Israel's President Reuven Rivlin and USA ambassador David Friedman both condemned the shooting in the Barkan industrial zone, where thousands of Palestinians and an equal numbers of Jewish Israelis have worked side-by-side for decades, as an attack on coexistence.
Israeli President Reuven Rivlin said: "This was not only an attack on innocent people going about their daily lives, it was also an attack on the possibility of Israelis and Palestinians co-existing peacefully".
Defense Minister Avigdor Liberman said it was only a "matter of time" before Na'alwa would be apprehended.