Backed by helicopters, occupation troops raided the Rafah refugee camp on Sunday. Israeli troops surrounded the home of Ashraf Abu Libda, a member of the leftist Popular Front for the Liberation of Palestine (PFLP) before shooting him, said medics and witnesses. He sustained multiple bullet wounds.
Six civilians, including the victim's six-year-old nephew, were also wounded in the attack, said Rafah hospital sources.
An Israeli army spokesman said the victim had been shot as he tried to escape from his house during an operation to find alleged tunnels used to smuggle weapons under the border with Egypt.
The latest attack came a day after Israel resumed its policy of assassinating Palestinian resistance leaders.
On Saturday, Israeli helicopters fired missiles at a vechicle of a senior member of Islamic Jihad in Gaza City, killing him and an 11-year-old boy.
Islamic Jihad leader Muhammad al-Hindi vowed retaliation for the killing of Aziz al-Shami. Israeli military sources said al-Shami was targeted because of his alleged involvement in a 1995 attack that left 22 Israelis dead.
He was also blamed for another attack last October that killed three soldiers in the Jewish settlement of Netzarim.
The international community, including Israel's staunch ally Washington, have condemned targeted killings.