But an Israeli military occupation source denied missiles had been fired on Wednesday and said helicopters had only fired light gunfire into open areas around the Rafah refugee camp during a "routine search" operation.
Though there were no immediate reports of casualties, witnesses said the missile strikes cause electric blackouts in the area.
Within hours, however, Israeli tanks and bulldozers rolled into Rafah and began demolishing houses.
An Israeli military occupation source said troops had entered the Rafah camp to conduct a "centred operation against terror infrastructures in the area".
Witnesses said troops ordered many people to leave their
homes as several tanks and bulldozers began demolishing houses.
One bulldozer knocked down a wall of a house while a family was inside but caused no casualties, the witnesses said.
The air raid came hours after a powerful explosion at the Qalandia checkpoint on the outskirts of Jerusalem killed two Palestinians and wounded 18 others.
Israel has often raided Rafah to arrest Palestinian resistance fighters and to destroy tunnels allegedly used by them to smuggle in weapons from Egypt.
An Israeli helicopter had fired a missile into a Gaza refugee camp on Tuesday night, wounding up to 15 people.