Irish Foreign Minister Brian Cowen, whose country holds the rotating EU presidency, said Israel's military operation in Rafah showed a "reckless disregard for human life".
"It is clear that today's action was completely disproportionate to any threat faced by the Israeli military," he said.
More than a dozen Palestinians were killed and around 50 were wounded on Wednesday when Israeli forces opened fire on a demonstration against the massive military operation.
Witnesses and local hospital staff told Aljazeera as many as 20 people were feared dead.
The Palestinians were protesting against the destruction of dozens of houses in Rafah, which Israel says is necessary to neutralise tunnels running under them that Palestinians use to smuggle in weapons from Egypt.
But EU foreign affairs chief Javier Solana said Israel was failing in its avowed aim of fighting "terrorism".
"These killings of civilians and destruction of private properties... constitute grave breaches of the Fourth Geneva Convention relative to the protection of civilian persons in time of war and amount to war crimes"
International Federation for Human Rights
"The steadily mounting death toll and the continuing destruction of houses in Gaza cannot but disturb all those who want to promote a settlement in the Middle East," he said.
"This is not the way to fight terrorism effectively, nor to prepare for a successful disengagement from Gaza in the conditions defined by the (diplomatic) quartet."
Israel's destruction of homes in the Rafah refugee camp is "unacceptable and wrong", British Prime Minister Tony Blair told parliament on Wednesday.
"We entirely understand the concern of Israel about acts of terrorism but what happened yesterday was unacceptable and wrong," Blair told MPs.
"We need to press on with the proposals for disengagement from the whole of Gaza and parts of the West Bank," he said, referring to Israeli Prime Minister Ariel Sharon's unilateral withdrawal plan.
Meanwhile, the Paris-based International Federation for Human Rights (FIDH) accused Israel of war crimes for its actions in the Gaza Strip, and called on the international community to intervene urgently.
Tony Blair called Israel's actions
unacceptable and wrong
"The FIDH once again reaffirms that these killings of civilians and destruction of private properties... constitute grave breaches of the Fourth Geneva Convention relative to the protection of civilian persons in time of war and amount to war crimes," it said.
It urged the diplomatic quartet for Middle East peace - the UN, EU, Russia and the US - to put pressure on Israel "to conform to the standards of international humanitarian law and to the guidelines of the road map".
Unsuprisingly, reaction from the US was more muted.
White House spokesman Scott McClellan said: "We are very concerned about reports from Gaza and the number of Palestinians who are said to have been injured and killed...
"We have asked the government of Israel for the facts about what happened today. We will continue to follow this closely and we urge all parties to exercise maximum restraint."
Israel says it is investigating the killings, and has not admitted responsibility for the attacks.
Israeli Army Brigadier Ruth Yaron said: "The claim that this was a case of deliberate fire is false and I reject it completely."