Israeli troops killed four Palestinians in a raid into the Gaza Strip today.
Prime Minister Ehud Olmert vowed to step up attacks on militants who fire rockets into Israel.
Palestinian hospital officials said three of the dead in the al-Bureij refugee camp were civilians, a woman, an 18-year-old man and a 16-year-old youth. The fourth was a gunman killed in battle with the Israelis.
Militants fired an anti-tank rocket, wounding several Israeli soldiers, during a raid which raised tension before US President George W Bush's visit to Israel and the occupied West Bank starting on Wednesday.
The fighting also wounded at least 25 Palestinians, including four women, a child and nine gunmen.
Mr Olmert told his cabinet that Defence Minister Ehud Barak had ordered security forces 'to escalate Israel's actions' in the territory after a rocket fired by militants last week reached an unprecedented distance, hitting the Israeli city of Ashkelon.
Israeli ground forces moved into al-Bureij at dawn, according to military and Palestinian officials.
Palestinian hospital staff said the 18-year-old and the other youth were shot dead. The woman died when a tank shell hit the house she was in. Another tank shell killed the gunman.
An Israeli military spokeswoman said troops shot several gunmen.
Israel has stepped up attacks against militants in Gaza to try to curb cross-border rocket salvoes from the territory.