The casualties include 11 people hit when a helicopter fired a missile at a building on Thursday where resistance fighters were concealed, Palestinian sources said.
Witnesses said the dead man, 19-year-old Ali Barhum, was a bystander shot by Israeli troops as he tried to flee the daylong clashes in Rafah camp.
Israeli military officials said a helicopter gunship fired a missile at a group of fighters battling occupation soldiers searching for tunnels used to smuggle weapons in from the nearby Egyptian border. One tunnel was located, the military sources said.
The clashes came hours after US President George Bush had pledged support for an Israeli pullout from the territory.
Seven gunmen were wounded in the helicopter missile strike, Palestinian sources said, adding that the rest of the wounded were civilians. There were no reports of Israeli casualties.
Palestinian sources said five houses were destroyed in the raid, launched late on Wednesday when 40 armoured vehicles backed by helicopter gunships thrust into the camp.
Overnight on Wednesday, a total of 12 Palestinians were arrested in raids in Jenin, Silwan, Nablus, Tulkarm and Bethlehem.
Israeli troops also demolished the houses of families of resistance fighters in a village near Tulkarm, Bethlehem and Beit Jala.
Earlier on Wednesday, some 12 people were wounded during clashes between occupation troops and protesters demonstrating against the separation wall under construction between the West Bank villages of Biddu and Beit Ajaza, west of Jerusalem.
Security forces used teargas and rubber bullets to disperse the protesters.
Ten Palestinians were hurt, including a 12-year-old Palestinian boy who was seriously injured after being hit in the head by a rubber-coated bullet. Two Israeli protesters were also lightly wounded in their legs.