According to the official Shin Bet announcement, security forces arrived at the suspected location in the West Bank in an effort to arrest the two men, when a firefight broke out during which both suspects were killed.
It was also cleared for publication by the Shin Bet that Bashar Kawasmeh, Mahmed Kawasmeh, and Taar Kawasmeh, the sons of the third suspect, Arafat Kawasmeh, who's already in custody, were arrested overnight.
Hamas' spokesperson abroad, Hussam Barduan, confirmed the killing, saying "Two members of the Izz ad-Din al-Qassam Brigades, Amar Abu-Eisha and Marwan Kawasmeh, were killed after a long life of sacrifice and giving. This is the way of the resistence and we follow in its wake step after step."
IDF Chief of Staff Lt.-Gen. Benny Gantz also commented on the killing, saying "on the eve of Rosh HaShana (the Jewish new year) Operation Brother's Keeper, which began on June 13th, has ended. We promised the Shaer, Frenkel and Yifrah families we would get the murders of their sons, and this morning we did it."
The Shin Bet has spent months searching for Kawasme (29) and Abu-Eisha (32), terrorists from the Hebron area, after they were named as the killers of the three teens, who were grabbed and shot dead near a settlement on June 12.
Hebron residents said troops had surrounded a house in the city before dawn and reported sounds of gunfire.
The forces were seeking to arrest Kawasme and Abu Aysha when a firefight erupted, in which the two wanted men were killed, IDF spokesman Lieutenant-Colonel Peter Lerner said in a telephone briefing.
"We opened fire, they returned fire and they were killed in the exchange," Lerner said. "We have visual confirmation for one. The second one, we have no visual confirmation, but the assumption is he was killed."
Palestinian officials have not confirmed the men were killed, however.
The two men were affiliated with Hamas, and a group leader praised their deed in August, though other top officials denied any advance knowledge.
IDF forces began West Bank sweeps and rounded up hundreds of suspected Hamas members after the three teens went missing as part of what has been come to be known as Operation Brother's Keeper, which preceded the 50-day Gaza war, officially Operation Protective Edge.
Yifrach, 19, and 16-year-olds Shaer and Fraenkel's bodies were found in June near Hebron. After initially denying involvement in the killings, Hamas last month acknowledged responsibility.
Reuters contributed to this report