Jenin refugee camp was in shock on Tuesday after the brutal murder of its theater director, with co-workers refusing to believe he was killed for his work.

Juliano Mer-Khamis, a well-known actor and theater director born of Jewish and Palestinian parents, died on Monday when a gunman opened fire on his car as he was driving home with his infant son and the babysitter.

The murder of the 52-year-old director of The Freedom Theater sparked grief and outrage among both Israelis and Palestinians, and no small measure of shock in this camp in the northern West Bank, where he had lived for the last seven years.

"I cannot believe it, it's like a nightmare," said Samia Steti, director of programs at the theater, who told AFP she had been speaking to Mer-Khamis just minutes before he was murdered.

"We met at 3:30 for about 15 minutes to prepare for a meeting about 'Alice in Wonderland' but then he left to take his baby son home with the babysitter," she said.

"About two minutes later we heard shooting and everybody started joking that they had killed him," Steti told AFP, saying Mer-Khamis himself had always made a point of joking around that one day he would die in the camp.

Then they went outside and realized what had happened.

Police and medics said the shooter had fired five bullets at Mer-Khamis, one of which hit the arm of the babysitter who was also in the car.

His 10-month-old son, who was sitting on his lap at the time, was unharmed, friends and co-workers said.

Overnight, police operating in the camp arrested four suspects, one of whom belongs to the Islamist Hamas movement, security sources said. They were also interviewing the babysitter who said she had seen the shooter's face, Steti said.

In the alleyway leading to the theater, dozens of pictures of the murdered thespian lined the walls among swathes of black cloth in a sign of mourning, an AFP correspondent said.

Inside, everyone was wearing black, and many had eyes red from weeping.

Friends and associates were in shock, with Zakaria Zubeidi, a former top militant who was close to Mer-Khamis and a supporter of the theater, telling reporters he believed the shooting was a professional 'hit.'

"The people behind this murder either belong to a powerful organization or a state," he told reporters. "This cannot be the work of people who were angry with Juliano or with the theater."

And Khaled Abu Al-Hijah, a board member at the theater who was also close to the family, told AFP Mer-Khamis had felt safe living in the camp.

"Jule was a resident of the camp. He lived here with his wife and children, who were always hanging around at the theater," he said.

"If you're afraid, you don't bring your children here."

Mer-Khamis, who was born and grew up in the northern Israeli city of Nazareth, never referred to himself as an Arab Israeli, Hijah said.

"He used to say: 'I am both Palestinian and Jewish. I cannot divide myself between my mother and my father.'"

Even the United Nations condemned the killing.

"He was a unique and talented actor and director and a symbol of coexistence and peace," said Richard Miron, spokesman for the UN Middle East envoy Robert Serry. "The UN's thoughts are with his family and all who he touched through his life."

After the shooting, his body was taken to Israel for a postmortem, with friends and co-workers saying the funeral was most likely to take place in Nazareth, although the camp was likely to hold a symbolic funeral.

The shooting was denounced by the theater and the people of the camp as "a coward's act" in a statement which said Mer-Khamis had been killed by "a traitor's hand."

Bilal Assaadi, chairman of the theater board of directors called on all the Palestinian factions to condemn the shooting and "to clarify their position on this heinous act."