Israel has said its troops have left the northern tip of the Gaza Strip and returned to their side of the border.
The move follows two days of fighting in the area, in which more than 30 Palestinians and one Israeli soldier have died.
Israeli forces remain in southern Gaza, as well as east of Gaza City.
Earlier, Israeli troops backed by helicopter gun ships clashed with Palestinian gunmen.
Several Palestinians were wounded in the fighting near Gaza's main commercial crossing at Karni.
Meanwhile, the United Nations General Secretary, Kofi Annan, has accused Israel of using disproportionate force in Gaza.
In a statement, he called on Israel to halt its military action immediately.
Separately, the Palestinian Islamist movement, Hamas, has for the first time confirmed that an Israeli soldier, captured almost a fornight ago, is alive.
The organisation said 19-year-old Corporal Gilad Shalit, who was seized in an attack on an Israeli border post 13 days ago, was being treated well and humanely.
Israel's incursion into Gaza in efforts to secure the soldier's freedom has resulted in the deaths of 30 Palestinians in the past two days.
