The suspects were killed in a shootout which took place before dawn on Tuesday, the IDF said.
Soldiers surrounded a house in Hebron, West Bank, with the two main suspects in the fatal kidnapping - Marwan Kawasme and Amer Abu Aysha - inside. The Palestinians eventually died in the exchange of fire.
"We opened fire, they returned fire and they were killed in the exchange," Israeli military spokesman Lieutenant-Colonel Peter Lerner said in a telephone briefing, cited by Reuters. "We have visual confirmation for one. The second one, we have no visual confirmation, but the assumption is he was killed."
Comment: Shoot first, ask questions later.
Three students Gil-Ad Shaer,16, Eyal Yifrah, 19, and Naftali Fraenkel, 16, went missing while hitchhiking in Gush Etzion, south of Jerusalem, on June 12.
The teenagers' disappearance sparked a massive door-to-door manhunt and hundreds of arrests in the Palestinian city of Hebron and surrounding villages in the West Bank, with the Israeli authorities accusing Hamas of the crime.
The teenagers were found dead almost three weeks after they disappeared. The Israeli Air Force bombed dozens of sites in the Gaza Strip hours after the dead bodies were discovered.
Hamas at first denied its involvement. However, the group's leader in exile - Khaled Meshaal - praised those who carried out the kidnappings.
It was only in late August that, a senior Hamas official, Saleh Al-Arouri, admitted for the first time, that members of the group's militant wing - Al-Qassam Brigades - were behind the kidnapping and killings.
Comment: Hardly: Sott Exclusive: Hamas' Al-Arouri claims group murdered 3 Israeli teens: Israeli Quisling?
Shortly after the bodies of the Israeli students were found, a 16-year-old Palestinian - Mohammed Abu Khdeir - was kidnapped and burnt alive. Three Israelis arrested for the crime confessed that it was a revenge attack.
The deaths of the teenagers have fueled increased tensions between Israel and the Palestinians and eventually led to the seven-week-long war in Gaza.
Some 2,100 Palestinians, mostly civilians, were killed in the attacks, according to Gaza officials. The death toll among the Israelis amounted to 67 soldiers and six civilians.
Comment: If Israel is the only democracy in the Middle East, democracy is not worth it. The behavior of the IDF is inhuman. The Israelis have no conception of the presumption of innocence. No, they murder on mere suspicion. But there's more to it than that. By simply murdering their 'suspects', they avoid any pesky trial, which would prove what is plainly obvious: these men were innocent. For the guilty parties, the Israelis need only look in the mirror: