Aya Mahmud Fayyad was showing her new school uniform to her friends when Israeli soldiers fired from an observation post from a Jewish settlement, said relatives on Sunday.
The girl’s mother, Umm Isam, told mourners at the family home that Aya had been killed as she showed off her clothing ahead of the start of the school year on Monday.
She described Israeli Prime Minister Ariel Sharon as “a terrorist who cannot live without seeing the blood of Palestinian children”.
The girl’s uncle, Arafat Fayyad, told the funeral there was no justification for the soldiers’ opening fire. “This is the Israeli army killing children without reason,” he said.
Resistance fighters lined the streets during the funeral and called for members to retaliate.
Aya's relatives unable to deal
with her death
In a move likely to increase tensions, Israel threatened to reinvade the Gaza Strip unless the Palestinian authorities reined in resistance groups.
Speaking on public radio, Israel's Defence Minister Shaul Mofaz, blamed Palestinians for failing to control the resistance fighters.
"The option of a ground operation by the army in the Gaza Strip exists and we will do it when we judge the moment is right," Mofaz said.
All Hamas activists are targets, he added.
The latest threat came amid escalating violence in the region, with the Israelis accusing the Palestinian Authority of failing to tackle the resistance groups.
Since 19 August when an explosion killed 18 bus passengers in west Jerusalem, Israel has assassinated ten Hamas activists and three civilians.
Israeli calls side-stepped
Solana (L) refuses to bow to
On the diplomatic front, European Union Foreign Policy Chief Javier Solana rejected Israeli demands to shun Palestinian President Yasir Arafat.
Solana, speaking on Sunday in Israel following talks with Israeli officials, said the EU would continue talks with the veteran Palestinian leader.
Israel has been urging the EU to follow Washington's lead and sideline Arafat.
The EU chief also criticised Israel's construction of a wall cutting off the occupied West Bank from the Jewish state.
Israel claims the barrier is intended to keep out activists but Palestinians fear it will demarcate the borders of a future state.
In a related incident, an Israeli working on the barrier was wounded when a Palestinian shot at him, reported military sources.
And in other news, an Israeli court sentenced a Hamas member to seven consecutive life terms for dispatching two activists who detonated explosives in Tel Aviv last year.