Several houses in Bait Lahya town and the Tal al-Zatar neighbourhood were struck by Apache helicopter gunships late on Sunday, Aljazeera's correspondent in Gaza reported.
Palestinian medical sources are yet to report any casualties.
The air assault came as Israeli medical sources said two people were slightly injured and six others were treated for shock when home-made Palestinian al-Qassam rockets hit the Negev town of Sderot early on Sunday.
The military wing of Hamas, Izz al-Din al-Qassam Brigades, issued a statement claiming responsibility for firing the rockets.
The attack was launched in response to the latest raid on Khan Yunus camp, the statement added.
The Israeli assault in Khan Yunus - the scene of repeated incursions into southern Gaza - was the latest in a series of incidents that have shattered a brief period of calm in the Palestinian territories after the death of President Yasir Arafat in November.
Families have been left destitute
after troops demolished homes
In the clashes, the Israeli army killed 10 Palestinians, including two resistance fighters, while a third fighter died after a tank shell blew him apart.
About 40 Palestinians were wounded in the raid which began on Friday.
Residents are still reluctant to leave their homes after the withdrawal, fearing more raids by Israeli army units, which have moved on to a nearby Jewish colony.
Aljazeera's correspondent in Gaza, Wael al-Dahduh, reports that initial information indicates up to 25 Palestinian homes have been razed in the area west of al-Namsawi neighbourhood.
The public-services infrastructure, streets in particular, has been damaged and farmlands have been razed, the correspondent said.
About 600 residents of Khan Yunus refugee camp who bore the brunt of the Israeli onslaught were given shelter in a UN-run school.
Khan Yunus in Gaza is a favoured
target of Israeli army reprisals
While the incursion lasted, Palestinians had been unable to bury the dead because Israeli forces were in control of the local cemetery, medics said.
The Israeli army said it launched the raid after resistance fighters targeted nearby Jewish settlements with mortar bombs and rockets, killing a foreign worker and wounding 17 more people.
Abu Harun, a spokesman for Abu al-Rish Brigades, part of Palestinian leader Mahmud Abbas's Fatah faction, said his group was behind some of the attacks.
"Resistance will not stop and no one will be able to stop it as long as occupation continues," he said.
Abbas condemned the Israeli raid, saying it was Israel's way of trying to obstruct a Palestinian presidential election on
Aljazeera correspondent Dahduh said the area remained tense on Sunday evening.
Israeli surveillance planes are flying overhead, contributing to the existing tension and raising the specture of more assaults and incursions, particularly if Palestinian resistance fighters fire mortars and home-made rockets on Israeli settlements.
Aljazeera's correspondent said conditions for those Palestinians who were made homeless in the raid remained dismal.
Homeless Palestinians have not received any aid from humanitarian organisations such as UNRWA and the ICRC, except the $300 handouts offered by the governorate of Khan Yunus to each homeless family.