Police initially said that convicted murderer Samuel Sheinbein had stolen a gun from one of his guards before special forces shot him dead.
But police now believe the notorious inmate may have smuggled the gun into the jail. A spokeswoman said the matter is being investigated.
Sheinbein, 34, fled from the US to Israel after murdering and dismembering a Maryland man in 1997. His case sparked a high-profile row between the two allies after he received refuge from extradition back to the US.
Police special forces said they rushed to the prison in central Israel after Sheinbein shot three guards, wounding two of them seriously.
Sheinbein then apparently barricaded himself inside the compound where a stand-off ensued, with counter- terrorism units dispatched to the scene.
The inmate then opened fire again, wounding three more guards, before he was shot dead by special forces.
Hospital officials said one of the wounded guards was fighting for his life.
Sheinbein's lawyers told Israeli TV their client was under duress and the Israeli prison service had ignored their warnings.
Sheinbein was tried in Israel in 1999, two years after he fled to the country and successfully sought refuge from extradition, enraging the Maryland authorities.