The two latest victims of violence were the targets of an early morning air raid on Jabalaya refugee camp, sources on both sides said on Friday.
Palestinians security sources identified one of the dead as 35-year-old Atif Sabbah of Hamas.
Palestinian witnesses said an unmanned plane had fired on the men. Earlier, witnesses had spoken of a tank shell being fired.
Four other people were wounded in the incident, medics said, adding that another shell had been fired on Jabalya earlier, injuring at least one person.
The latest violence raised to 4395 the number of people killed since the start of the intifada four years ago. They include 3371 Palestinians and 953 Israelis.
Tanks roll in
Thirty-five tanks were seen entering Bait Hanun, while another 30 were seen pushing into Bait Lahya and 30 more spotted moving into the eastern sector of Jabalya, all in northern Gaza, early on Friday.
Around 100 Israeli tanks have
moved into northern Gaza
The Israeli security cabinet on Thursday unanimously approved the invasion of the Jabalya refugee camp and the nearby town of Bait Hanun.
Earlier, an Israeli official said the security cabinet was likely to endorse a broader operation in Gaza that would see Israel reoccupying wide areas of the territory.
But he said it would not be "a permanent occupation".
"We are intending to make the Palestinians pay a heavy price so they will understand that continuing to fire Qassam rockets does not pay," the official said.
Members of the security cabinet have been allegedly pressing for the army to carry out a second invasion of Gaza, according to Israeli Army radio.
Since March 2002, Israel has reoccupied most of the West Bank claiming that they are detaining Palestinian resistance fighters and stopping bombing attacks.
At least 32 Palestinians were
killed on Thursday
The decision to intensify the raid came after one of the bloodiest days in the four-year-old Palestinian intifada which saw at least 32 Palestinians killed and over 100 injured
In other unrest, a Palestinian suspected of collaborating with Israel was shot and badly wounded by a group of masked men in the northern West Bank two of Jenin overnight, medics said.
Meanwhile, Palestinian fighters fired two makeshift rockets on Sderot in southern Israel on Friday without causing any casualties, said an Israeli army spokeswoman.
"One rocket landed in an open field and the second one inside the town. There are no casualties or damages," she said.
Palestinian fighters fired missiles
into Sderot again on Friday
The attack, staged from the northern Gaza Strip, occurred despite the massive presence of Israeli army in that territory with the self-declared objective to stop the firing.
The Popular Resistance Committees claimed responsibility for the attack.
In other developments, Israeli police decided to limit access to Jerusalem's Al-Aqsa mosque compound as it said it feared disturbances for the fourth anniversary of the intifada.
Only women and men aged above 40 will be allowed to pray at the compound after mid-day.
A controversial visit by then opposition leader Ariel Sharon to the site sacred to Muslims sparked the first clashes of the intifada on 28 September 2000.