About 30,000 Palestinians were confined to their homes after the incident, which occurred shortly after noon prayers in Gross Square, an area heavily patrolled by Israeli soldiers.
Israeli soldiers fired several shots in the air. They later ordered bystanders to leave to allow the hand grenade to be detonated.
In a similar incident in September, an activist in the Islamic militant group Hamas threw two hand grenades at a group of Israeli soldiers in Gross Square. A dozen soldiers and several Palestinian civilians were injured. The assailant was later arrested by Israel.
Hebron is a divided city of 130,000 Palestinians and 450 Jewish settlers; the settlers do not have to observe the curfew. Israel controls the city's downtown area.
Meanwhile Friday, scores of rabbis from Jewish settlements and Israeli cities moved to bring down Israel's government and stop the handover of West Bank land to the Palestinians. Taking a stand in a dispute that has split the National Religious Party, the rabbis called on the party to pull out of Prime Minister Benjamin Netanyahu's government.
The rabbis' demand came after Netanyahu's cabinet approved an agreement with the Palestinians that calls for Israel to turn over another 13 percent of the West Bank.
Netanyahu has a one-seat majority in the parliament. The NRP has nine seats in the legislature and two ministers in Netanyahu's 17-person cabinet.