Several tanks were spotted rolling out of Tal al-Sultan on Monday, just hours after Israeli Prime Minister Ariel Sharon talked of renewed efforts to evacuate illegal Jewish settlements.
An Israeli military source said Monday's "pullout" was part of a "new deployment" aimed to "ease conditions" and allow residents to leave their homes to stock up on food, water and medicine.
But Israeli troops remained in at least one other Rafah region, known as al-Brazil camp, witnesses said.
Israel alleged it launched the largest raid in Gaza for years to hunt for tunnels used to smuggle arms from Egypt, although only homes were destroyed.
In Nablus in the occupied West Bank, a 13-year old boy was killed and the leader of a resistance group injured, after forces raided the town and its refugee camps early on Monday.
Aljazeeera's correspondent reported that several buildings were occupied during the invasion.
Bulldozers destroyed many
homes in the Rafah siege
Abud Akubi, the leader of Fatah's al-Awda Brigades in Nablus, was injured.
Three Palestinians, including a woman, had also been injured in clashes with Israeli forces in Balata refugee camp east of Nablus, the correspondent added.
Over 40 Palestinians have died and hundreds been made homeless in a week of violence in the Gaza Strip that left dozens of demolished homes, acres of levelled agricultural land and residents despairing over how the destruction will be repaired.
The UN agency for Palestinian refugees (UNRWA) said on Monday it had handed over 86 homes to families living in the Gaza Strip towns of Rafah and Khan Yunis whose houses were destroyed by Israeli troops.
The new shelters - built at a total cost of 4.6 million dollars - will house 93 families, or a total of 475 refugees, the agency said in a statement.
More than 1300 buildings housing 18,300 Palestinians have been destoryed since the September 2000 start of the inifada
UNRWA said that as of 10 May, a week before the launch of Israel's deadly Rafah offensive, more than 1300 buildings housing 18,300 Palestinians had been destroyed in the Gaza Strip since the September 2000 start of the Al-Aqsa Intifada.
Families waiting for new homes have been given food, tents, blankets and basic kitchen equipment, the UN agency said.
Thus far, UNRWA has helped build 374 new homes in the territory, 241 are under construction and 201 are at the design stage, the agency said.
Some $35 million in additional funds will be needed to provide shelter to the remaining homeless Palestinians in the Gaza Strip, according to UNRWA estimates.
The main resistance movement Hamas, has lambasted Arab countries for failing to prevent what it described as a "genocide" perpetrated by the Israeli occupation army against the Palestinians in the town of Rafah.
"What happened in Rafah is a genocide, an operation planned to avenge the deaths of Israeli soldiers killed in Zaitun and Rafah," the group said in a statement.
"The Israeli occupation army gave its soldiers a licence to kill and countries which pride themselves on being democracies and defending human rights are sitting idly by and participating in the general silence over these crimes"
Hamas was referring to the killing of 13 soldiers in separate attacks by resistance fighters two weeks ago, which prompted Israel to launch the Intifada's largest "operation" in the Gaza Strip, leaving 43 Palestinians dead since last week.
"The Israeli occupation army gave its soldiers a licence to kill and countries which pride themselves on being democracies and defending human rights are sitting idly by and participating in the general silence over these crimes," the statement said.
The movement, whose military leader in Rafah was killed during Israel's raid of the town, singled out "Arab countries, of which we expected a more courageous stance to let the Palestinians feel they are not alone."
"Hamas calls on Arab and Muslim countries to take immediate action which will save Palestinian lives. Their disturbing silence will only allow for more crimes by (Israeli Prime Minister Ariel) Sharon and his government," the group warned.