The victims, all of them civilians, were wounded in the strike on the house in the Khan Yunus refugee camp, medics said. Before the strike, Palestinian residents said helicopter gunships had been flying over the Gaza Strip.
Abd al-Salam Abu Musa, a known member of the armed wing of Hamas, the Izz al-Din al-Qassam, lived in the house, witnesses told Aljazeera.
But Abu Musa escaped from the house four minutes before the missiles struck, they added.
An Israeli military spokesman said the building had been a weapons store for Hamas and that many explosions were heard inside after it was hit.
'Marked for death'
Israeli Prime Minister Ariel Sharon has vowed to track down and kill resistance members following the collapse of a unilateral ceasefire by Hamas and others. Israel continued its raids and attacks on Palestinians despite the ceasefire.
Sharon said in a newspaper interview published on Sunday that Hamas leaders were "marked for death".
He vowed to keep up the hunt for them which intensified after a bomber killed 22 people on an Israeli bus in Jerusalem on 19 August. The attack was in retaliation for bloody Israeli raids into Palestinian territories.
Israeli air strikes have killed 12 Islamist resistance activists in the Gaza Strip since the Jerusalem attack.
An Israeli fighter plane fired a missile at a house in Gaza City on Saturday, and wheelchair-bound Hamas spiritual leader Shaikh Ahmad Yasin escaped with light wounds.
Peres criticises assassination attempt
Former Prime Minister Shimon Peres criticised the attack on Yasin as a move which was likely to escalate the situation.
But current Premier Ariel Sharon was quoted as saying that Hamas' leaders were "dead men" while a senior official said that Israel planned to wipe out Hamas entirely.
"We intend to liquidate all of Hamas, without any distinction between the political and military branches of this terrorist organisation"
Unnamed Israeli official
"We intend to liquidate all of Hamas, without any distinction between the political and military branches of this terrorist organisation," the official told AFP on condition of anonymity.
Yasin said on Sunday that Hamas would teach Israel "an unforgettable lesson" as hundreds of supporters gathered outside his home to congratulate him on surviving Saturday's airstrike.
Egypt called on the world on Sunday to condemn the attack on Yasin.
"We condemn Israel's actions against civilians. Destroying homes and killing people with aircraft in streets crowded with civilians is a crime," Foreign Minister Ahmad Maher said. Egypt had forged a peace treaty with Israel, but withdrew its ambassadors in 2000 in protest at Israel's handling of the al-Aqsa Intifada or uprising.