Israeli tanks backed by helicopters stormed the Gaza Strip town of Rafah early on Monday, our correspondent said.
Palestinian resistance fighters threw a grenade and opened fire at troops who attempted to detain activists overnight. One soldier was lightly wounded.
Palestinian medical sources said a leader of al-Quds Brigades, the armed wing of Islamic Jihad, was killed. Members of al-Aqsa Martyrs' Brigades, the armed wing of Palestinian President Yasir Arafat's Fatah movement, were also killed.
Occupation soldiers razed at least one home and several businesses.
West Bank raids
In the occupied West Bank, Israeli soldiers shot dead a Hamas activist near Bethlehem during an invasion of the area.
Occupation troops surrounded the home of a wanted activist, as Palestinian fighters clashed with soldiers, reported our correspondent. Soldiers also stormed the nearby Aida refugee camp.
Four Israeli soldiers were wounded.
The invasions followed comments by Israeli Defence Minister Shaul Mofaz on Sunday that the heads of resistance groups were targets for assassination.
Mofaz's threat came after Hamas' spiritual leader Shaikh Ahmad Yasin warned the group would try to kidnap Israeli soldiers.
Yasin called for the kidnapping of Israeli soldiers a day after Lebanese resistance group Hizb Allah brokered a prisoner swap deal with Israel. A total of 400 Palestinians, 23 Lebanese and 12 Arab nationals were released in exchange for the remains of three Israeli soldiers and a suspected Mossad spy from Lebanon.
Hamas officials did not immediately react to Mofaz's comments.
Palestinians and the international community condemn Israel's policy of targeted killings. In September, Yasin escaped an assassination attempt in the Gaza Strip.