An eight-year-old child, who was hit by a bullet in the neck, is among the casualties in the raid that began late on Sunday and continued into Monday.
Unmanned Israeli aircraft fired missiles into the area as troops backed by tanks and bulldozers demolished houses and razed farmland, Aljazeera's correspondent reported.
Aljazeera also reported at least one Palestinian was killed and four wounded in a pre-dawn helicopter attack on Khan Yunus.
Eighty-four Palestinians, including civilians, were also wounded in the raid that Israel said was to prevent mortar attacks on the illegal Jewish colony of Gush Katif.
Khan Yunus governor Husni Zuarab told Aljazeera that a mosque in the western district of al-Namsawi was also destroyed in the continuing assault.
"Operation Days of Penitence or all other Israeli operations are continuing against all governorates of Palestine," he said.
Early on Monday, three Israeli soldiers were killed after Palestinian resistance fighters fired an anti-artillery shell directly at an Israeli tank in Khan Yunus.
Hamas' military wing, Izz al-Din al-Qassam Brigades, claimed responsibility for the attack.
Two Palestinian policemen were among those killed when Israeli aircraft fired missiles at a national security service position early on Monday.
Two Palestinian policemen have
been killed and five injured
The attacks also wounded five other policemen and came hours after the Israeli cabinet approved details of a plan to withdraw Jewish settlers from parts of the Gaza Strip.
Witnesses said all the casualties had been wearing uniforms and carrying automatic weapons. The Israeli army said it was targeting armed men who were moving towards Israeli soldiers, preparing to attack.
Another missile killed a Palestinian who the military said was preparing to plant a bomb in the path of Israeli troops.
Early on Monday, a missile was fired at a group of people who the Israeli occupation army said had explosive devices. One Palestinian was killed.
Later, a tank fired a shell towards another group of Palestinians that had gathered at the edge of Khan Yunus refugee camp, killing one person.
West Bank attacks
Israel has also assassinated a Hamas member who is believed to have been the inventor of the Qassam rocket, a makeshift weapon that has often been fired at settlements and southern Israel in a show of defiance.
A car bomb targeted an Israeli
army patrol in Nablus
On the West Bank, Palestinians launched two attacks but no one was hurt, the Israeli army said.
A tyre filled with explosives was hurled at a bus, and a car bomb exploded near an army patrol at Nablus in the north.
Two dozen Israeli tanks and armoured personnel carriers have taken up positions around an illegal settlement in occupied Gaza and Khan Yunus.
The latest attacks bring to 4524 the number of Palestinians, Israelis and others killed since the second intifada began in September 2000.