Only residents, senior Palestinian officials and humanitarian cases will be allowed through the checkpoints that have been set up until further notice.
The restrictions were imposed after a Palestinian policeman shot and injured three Israeli soldiers at a checkpoint outside the city before being killed.
Ramallah is home to the headquarters of the Palestinian Authority.
A large number of Palestinians, foreign diplomats and aid workers travel to the city every day.
While diplomats were not directly affected by the restrictions, one told the AFP news agency it was "having an effect in terms of our ability to engage".
"A number of meetings have been called off because Palestinian interlocutors have not been able to get to the meeting site," the diplomat added.
Palestinians said the measures - which were common during the second Palestinian uprising, or intifada - amounted to collective punishment.
"They shouldn't punish the entire governorate of Ramallah for a policeman who carried out an attack," Palestinian police spokesman Adnan Damiri told the Associated Press.
The Israeli authorities have struggled to halt a wave of stabbing, shooting and car-ramming attacks by Palestinians or Israeli Arabs that have left 28 Israelis dead since October.
More than 155 Palestinians - mostly attackers, Israeli officials say - have also been killed in that period.
The assailants who have been killed have either been shot dead by their victims, or security forces as they carried out attacks. Some attackers have been arrested.
Other Palestinians have been killed in clashes with Israeli troops amid spiralling violence.
On Monday, Israeli troops shot and killed a Palestinian after he attempted to stab soldiers near the settlement of Salit in the West Bank, the Israeli military said.
The Israeli military is preventing non-residents from entering the city of Ramallah in the occupied West Bank.