The air strike came during a day-long Israel military raid on the Khan Yunus refugee camp, in which troops killed five other Palestinians, including three resistance fighters and two teenagers.
The Israeli army said the raid was launched to stop a barrage of mortar and rocket fire at neighbouring Jewish settlements in the Gaza Strip which Israel captured in the 1967 Middle East war.
Israeli colonies built on occupied Palestinian lands are deemed illegal under international law.
Two of the slain men belonged to an armed faction of Palestinian leader Mahmud Abbas' mainstream Fatah. Group members said they had taken part in attacks on the illegal settlements with mortar bombs in the past two weeks.
House blown up
The Israeli drone targeted the armed fighters in the town a short time after Israel had sent in more troops and armoured vehicles to Khan Yunus, witnesses said.
The Israeli army confirmed that the air force had targeted an armed group in a raid on the refugee camp and that the target was hit.
Some 20 armoured vehicles were
involved in Thursday's operation
In an earlier incident, two people were hurt by flying debris when Israeli soldiers blew up a house in Khan Yunus after dark, witnesses said.
Shortly before dawn on Thursday, some 20 Israeli armoured vehicles entered the refugee camp.
In the resulting gun battle, four people aged between 17 and 32 were killed. Resistance movement Hamas gave the names of its dead as Yahya Abu Bakr and Sami Abu Khudair.
The third death was of Ammar Azzam, a member of al-Aqsa Martyrs' Brigades. However, 17-year-old Muhammad Abu al-Said was not known to belong to any armed resistance movement.
Israeli occupation forces also killed a Palestinian teenager with Down's Syndrome, medics said.
Aljazeera's correspondent in Gaza reported that a large number of homes were demolished, tanks opened fire on houses and at least three civilians were rushed to hospital.
Two Israeli soldiers were also slightly injured during the raid on the refugee camp.