The overnight operation targeting the station's Ramallah offices was the latest attempt to silence Palestinian broadcasters Israel believes are fuelling a five-month wave of violence.
The Shin Bet charged that the channel "broadcasts on behalf of the Islamic Jihad" militant group and said it had closed it in a joint operation with the army.
"The channel served the Islamic Jihad as a central means to incite the West Bank population, calling for terror attacks against Israel and its citizens. Incitement was broadcast on the television station as well as the Internet," it said in a statement.
Israeli forces arrested Palestine Today manager, Farooq Aliat, 34, of Bir Zeit, north of Ramallah, "an Islamic Jihad operative who had been imprisoned in Israel for his activities," it added.
Cameraman Mohammed Amr and technician Shabib Shabib were also arrested, the Palestinian Journalists Union said.
An army spokeswoman said technical equipment and transmitters were confiscated from the Ramallah offices, which were ordered shut.
The channel, which has offices in the Hamas-controlled Gaza Strip, continued to broadcast to the West Bank via its Lebanese transmitters, it said.
Islamic Jihad denounced the "Israeli aggression against the nationalist media of the resistance," calling the raid "another episode in the long saga of oppression by the occupation."
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A wave of violence has killed 188 Palestinians, 28 Israelis, two Americans, an Eritrean and a Sudanese since October 1, according to an AFP count.
Most of the Palestinians were killed while carrying out knife, gun or car-ramming attacks, which have taken place more or less daily over the past five months.
Others were shot dead by Israeli forces during clashes or demonstrations.
Many analysts say Palestinian frustration with Israeli occupation and settlement building in the West Bank, the complete lack of progress in peace efforts and their own fractured leadership have fed the unrest.
Israel blames incitement by Palestinian leaders and media as a main cause of the violence.
In November, Israel shut down two radio stations in the flashpoint West Bank city of Hebron -- Al-Hurria and Al-Khalil -- accusing them of fanning the violence.
On Thursday, Israel's security cabinet discussed ways to tackle the unrest, including "closing Palestinian broadcasters inciting terror," the prime minister's office said.
A day earlier Israeli forces had arrested Al-Quds radio correspondent Sami al-Saee, 36, at his house in the northern West Bank city of Tulkarm, according to a Palestinian NGO.
Other measures being advanced by the government following a new spate of attacks since Tuesday include completing the security wall around Jerusalem, revoking Israeli work permits for relatives of Palestinian attackers and expediting demolitions of perpetrators' homes.
Israel has increased its efforts against Palestinian labourers without permits, arresting more than 400 workers and dozens of Israeli employers over the past two days, police said.