A large number of Israeli forces and tanks attacked Yibna and Block O in Rafah refugee camp early on Tuesday.
The shells landed in an area where a large number of Palestinian resistance fighters of different groups, journalists and ordinary people had gathered.
Three members of Hamas's military wing, Izz al-Din al-Qassam Brigades, were killed, the correspondent Hiba Akila said.
A Reuters cameraman and many citizens, including women and children inside their houses, were injured. "I was next to the border and suddenly there was a big explosion," said the cameraman Bassam Masud.
A young Rafah Palestinian
wounded in the Israeli attack
The Israeli attack on the refugee camp is still continuing, focused on the Yibna camp and Block O area (along the Egyptian borderline), the correspondent reported.
Israeli Apache helicopters were hovering over the area, she added.
Israeli forces, backed by a large number of military vehicles, also destroyed farmland and houses in the area, Akila said.
There was also a huge explosion. "Ambulances rushed to the scene to take casualties to hospitals," the correspondent said.
Forces stay back
"I was next to the border and suddenly there was a big explosion"
The forces are now stationed in Block O of the Rafah refugee camp, where the explosion was heard, Akila said.
Agency reports quoting witnesses said the explosion appeared to be from a bomb that resistance fighters detonated against the Israeli troops.
Violence has surged in the Gaza Strip before a planned Israeli pullout next year from the territory it occupied in the 1967 Middle East war.
Earlier, clashes broke out in Rafah on Monday night when Israeli tanks and troops moved in on a raid to look for tunnels they say are used to smuggle arms from Egypt during nearly four years of Israeli-Palestinian conflict.
The Israeli military operation in Bait Hanun city in the northern Gaza Strip has been continuing for the sixth week running, our correspondent reported.
Israeli forces have destroyed farmland, houses and laid siege to hundreds of families inside their homes, she said.
International organisations have attempted to pressure Israel to ease the siege, the correspondent reported.
Bait Hanun residents have
protested at Israeli siege
The besieged people are experiencing a difficult situation now, she said. Some are very sick and cannot reach the hospitals. Some areas in the city have been suffering a cut in power and water supplies for more than a month, she added.
Hamas claims responsibility
Meanwhile, Aljazeera has received a statement issued by Izz al-Din al-Qassam Brigades, the military wing of Hamas Movement, claiming responsibility for killing three Palestinian collaborators (with the Israeli occupation) on Monday.
The statement said the killing was to punish the three for participating in the assassination of senior Palestinian leaders.
"It is time to exercise penalty against the collaborators particularly after giving the Palestinian Authority enough time to punish them," the statement added.