Witnesses said the helicopter fired a missile at the building early on Thursday. There were no immediate reports of casualties.
The Israeli occupation army later said the air force had targeted a weapons workshop of the Palestinian resistance group Hamas.
It said the attack was followed by a "series of explosions, indicating there was a large amount of explosives inside".
On the other hand, locals said the two-storey building housed a home and a metal foundry.
Dozens of neighbours gathered at the scene of the blast, some of them trying to extinguish the blaze while others combed through the rubble in search of casualties.
Thursday's air attack came as Gaza coped with a surge in internal strife over demands for Palestinian President Yasir Arafat to reform his security apparatus and delegate wider powers to his prime minister, Ahmad Quraya.