Witnesses said Husayn Abu Akir, seven, died on Saturday after he was hit in the head and arm by live fire from an Israeli tank during an army raid in the Khan Yunis refugee camp.
The action sparked clashes with Palestinian gunmen and stone-throwing youths.
Ten more Palestinians, mostly children and teenagers, were wounded in the clashes, Palestinian medics said.
Akir's death comes as Israeli Prime Minister Sharon's Likud party prepares to vote on Sunday in a non-binding referendum on his plan to evacuate all Jewish settlements from Gaza and some from the West Bank, which Sharon says will boost security in Israel.
The plan – which Palestinians are calling a land grab by Israel – also calls for Israel to retain large settlement blocs in the West Bank.
Akir's cousin, Ikhlas, said Akir was on his way to pray at a mosque in the area with his brothers.
"Tanks started to open heavy fire towards the air," she said. "Husayn fell in front of the mosque and the others fell near him. He was bleeding for more than 30 minutes before ambulances could reach him because of the intense fire."
Also in the Gaza Strip, witnesses said Israeli soldiers shot and wounded three Palestinians in Rafah refugee camp and near the village of Bait Lahiya.
Israeli military sources confirmed soldiers shot towards the Palestinians, but could not say if they were hit. The sources said the Palestinians were trying to infiltrate a settlement near the village.
West Bank clash
In the West Bank, Israeli troops opened fire on a crowd of young men throwing stones at the troops on Saturday in Tubas, 17km south of Jenin.
According to medics, Zakaria Daraghmah, 18, was shot in the head and is in a serious condition.
Israeli military sources: "Forces came to Tubas in order to conduct a search and came across Palestinians that attacked them with stones.
"In order to disperse the crowd and continue the routine patrol, forces used non-lethal means - rubber bullets."
And at the Erez crossing point between the northern Gaza Strip and Israel, a 15-year-old Palestinian was hit in the head by Israeli fire as young men were hurling stones at troops, medics said.
A second teenager was moderately wounded in the incident.
The international community and human rights groups frequently criticise the Israeli army for using excessive force and of contravening the Geneva Conventions – most notably in regard to Palestinian youths.
Late last month, an Israeli rabbi released images of Israeli soldiers strapping a 12-year-old Palestinian boy to an Israeli army vehicle and using the boy as a human shield.
Rabbi Arik Ascherman has since stated that he is seeking to press charges against the Israeli army about the incident.