The submersible was carrying three fee-paying passengers -- British billionaire Hamish Harding, and Pakistani tycoon Shahzada Dawood and his son Suleman.
Israeli security forces said they shot the gunman and were still searching for other attackers near the Jewish settlement of Eli north of the Palestinian city of Ramallah.
Mir is one of India's most wanted terrorists and has a bounty of USD 5 million placed on his head by the US for his role in the 26/11 Mumbai terror attacks.