At least 18 houses were demolished in the latest campaign before dawn on Thursday, said Palestinian security officials. Israel claimed the homes were used in resistance attacks against occupation troops.
Israeli forces re-invaded parts of Rafah in the southern Gaza Strip on Wednesday to search for alleged arms smuggling tunnels that run under the Gaza border with Egypt. Palestinians deny any such tunnels exist.
Last month in Rafah Israeli troops killed 55 Palestinians - mainly civilians - and destroyed hundreds of homes.
Soldiers later withdrew from the al-Shair and Qashta areas in Rafah on Thursday, reported Aljazeera's correspondent.
The United Nations Relief and Works Agency (UNRWA) has launched an appeal for $16 million for Palestinians living in Rafah.
The aid organisation also condemned an Israeli attack on Tuesday on one of its schools in Rafah, which injured two 10-year-old boys.
Tal al-Sultan was the most
devastated area in Rafah
An Israeli tank opened fire on an UNRWA school in the Tal al-Sultan neighbourhood, the scene of some of the deadliest attacks during last month's siege, said the group in a statement on Wednesday. Bullets or shrapnel entered the classroom, hitting one boy in the head.
The second boy, Mahmud Nathmey Hamad, was struck in the neck and is in serious condition.
"This is the second time in a little over a year that a child in a UN classroom has been struck by Israeli fire. Such indifference to the sanctity of schools and the UN flags flying above them violates all humanitarian norms and is absolutely deplorable," said Peter Hansen, UNRWA's commissioner general.
In March 2003, Israeli soldiers shot Huda Darwich, then 12, in the head in Khan Yunis. She was left permanently blind.
West Bank raids
Meanwhile, in the occupied West Bank Israeli forces detained 21 Palestinians, mainly al-Aqsa Martyrs Brigades activists, overnight, reported Aljazeera's correspondent Walid al-Umari.
Prominent leader Jamal Sadun and activist Sultan Tashtush, accused of launching resistance attacks and manufacturing explosives that left 23 Israelis dead, were also detained in the campaign focused mainly in the city of Nablus, said al-Umari.
The al-Aqsa Martyrs Brigades is the armed wing of Palestinian President Yasir Arafat's Fatah movement.