Palestinian medical sources early on Tuesday named the victim of the attack as 14-year-old Mazin al-Agha from Rafah.
The teenager received multiple wounds from a machine gun mounted on a tank. Numerous armoured vehicles and two bulldozers also moved into the refugee camp.
An occupation forces spokesman confirmed soldiers had opened fire on a suspect who was too close to a bulldozer that had begun knocking down a ruined house.
Earlier, a Palestinian farmer was killed by Israeli firing late on Monday near an illegal Jewish colony in the occupied Gaza Strip, Palestinian sources said.
The Israeli army said soldiers had opened fire on a suspect seen climbing towards the fence at the Morag settlement in the south of the Strip.
The number of Palestinians who have been killed since the beginning of the al-Aqsa Intifada is now more than 3200, with many thousands more suffering serious debilitating injuries.
About 927 Israelis have also been killed in the same period.