At least five Israeli soldiers were killed and another five wounded when their armoured vehicle was hit by a blast in the southern Gaza Strip city of Rafah on Wednesday, Aljazeera's correspondent reported.
The military wing of Islamic Jihad has claimed responsibility for the Rafah attack, saying it was carried out in response to the Israeli assassination of Shaikh Ahmad Yasin in March.
The latest Israeli deaths came amid a day of violence in Gaza City that reportedly left at least three Palestinians dead - including a child - following a helicopter missile strike.
The missile attack came in the midst of sporadic fighting in al-Zaitun district as Israeli forces searched house-to-house for the remains of their troops killed in a resistance attack the day before.
Blasting their way into building after building on Wednesday, Israeli troops vowed not to leave the city until they had recovered the body parts. Numerous explosions were heard around the district.
Palestinian resistance fighters agreed with foreign mediators on Wednesday to hand over the body parts of Tuesday's six dead Israeli soldiers if Israeli troops pulled out of Gaza City, Palestinian sources said.
A Palestinian boy takes cover
as Israeli soldiers invade Gaza
Resistance leaders earlier said they had taken the remains away from al-Zaitun to use as bargaining chips for demands that Israel should end its raids into the Gaza Strip and release Palestinians in its jails.
Israel has vowed, however, to keep its forces in place until the soldiers' remains are turned over.
Shortly after the resistance leaders' statement, witnesses saw an Israeli navy gunboat fire a shell at a Palestinian security target on the coast of Gaza.
There was no immediate word of casualties or damage.
Palestinian Authority officials said that together with Egyptian mediators and the International Committee of the Red Cross they were trying to persuade various resistance factions to hand over the remains without conditions.
Palestinian President Yasir Arafat told aides there was no excuse for delay and demanded groups should "show respect for the dead".
But a senior Palestinian security official in Gaza told AFP: "the Israeli army must first leave al-Zaitun to give a chance for these efforts to succeed."
Nine Palestinians have been killed and about 120 injured as Israeli occupation troops rampaged through Gaza City after the deaths of six of their number during a dawn raid on Tuesday.