The man, identified as Raad Hazem, 29, from Jenin in the occupied West Bank, was tracked down to nearby Jaffa and martyred in a shootout.
He was found near a mosque about 6 km away. He was martyred after a brief gun battle with counter-terrorism and security agents, according to Hebrew media sources.
Hours earlier, he had opened fire at Dizengoff Street, one of the busiest streets in Tel Aviv, sparking a night-long manhunt.
Two zionists were killed and 14 others wounded in the shooting attack, the sources said.
It was the latest in a spate of similar shootings which left 13 zionists killed, including police officers. All the shooters were killed.
The attacks are seen as in response to the escalated israeli demolition and repression policy pursued against the Palestinians.
Meanwhile, Palestinian social media activists shared footage showing the father of Tel Aviv shooter Raad Hazem while expressing pride in his son's heroism.
Addressing hundreds of people who gathered outside his house, the father expressed confidence that victory over the occupation will be achieved sooner rather than later at the hands of the new generation.