Naalwa used a homemade gun, known locally as a "Carlo", according to the army, in what security forces believe was a "lone-wolf attack", meaning he was not part of a militant organisation or acting on its behalf.
Since the attack was allegedly carried out by a Palestinian employed at the Barkan industrial zone in the occupied West Bank, questions were raised over whether he knew the victims and over the motivation behind the shooting. A 12-year-old boy was among the dead.
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.
Critics - many of whom have pushed to boycott the industrial zones - say Israel is taking advantage of a vulnerable workforce and a Palestinian economy crippled by Israeli restrictions. The second was named as Ziv Hajbi, 35, a father of three.
Another woman sustained serious injuries and was taken to hospital.
Surveillance camera footage broadcast on Israeli television showed a man armed with a rifle fleeing down stairs and running away from the factory.
Speaking at the beginning of the weekly cabinet meeting, Benjamin Netanyahu called the shooting "a very severe terror attack". The Palestinian economy is heavily restricted under Israeli military rule, forcing tens of thousands of Palestinians to seek work in Israel as well as Jewish settlements.
"One of the workers was sacked and he didn't like the owner". "That's what I think happened".
Barkan industrial park is next to the settlement of Barkan and was established in the early 1980s.
The army has launched an investigation into how Na'alwa was able to smuggle his weapon into the gated industrial park and into whether he had bound Levengrond Yehezkel with the intention of taking her hostage.