An Israeli army spokeswoman confirmed the Thursday night air strike in the town of Bait Lahya.
Local residents said the missile struck a trailer outside the home of Mahmud al-Madhun, a senior commander of the al-Aqsa Martyrs Brigades.
Several people were hurt from smoke inhalation and flying debris, they said.
Earlier in the day Israeli forces tried to assassinate another commander of a Palestinian resistance movement.
A spokesman for the Popular Resistance Committees told Aljazeera on Thursday that Jamal Abu Samhadana had survived a missile strike in the occupied Gaza Strip.
Witnesses said two people travelling with him were injured after an unmanned drone fired at their car near the Rafah refugee camp.
Uraiqat: Assassination attempts
undermine peace efforts
Abu Samhadana told Aljazeera the attempt on his life would escalate the Palestinian struggle against Israel.
"Assassination attempts, even if they succeed, won't weaken the resistance, but will only strengthen it. We will continue fighting until we liberate all Palestinian land," he said.
The Israeli military has not commented on the attack, but it comes as international censure of military practices in the occupied territories has increased.
The US called on Israel to "avoid actions that escalate tension".
"We understand Israel's need to defend itself from attacks, but Israel should consider the consequences of its actions," said a US State Department spokesman.
"We urge all parties, especially at this moment of opportunity for progress, to remain focused on measures to bring an end to violence and terror."
Thursday's strike on Abu Samhadana was Israel's first targeting of a top-level resistance leader since Yasir Arafat's death on 11 November. An Israeli army statement blamed Abu Samhadana for "numerous terrorist attacks".
Palestinian cabinet member Saib Uraiqat said the "continuation of assassination attempts" undermines efforts to revive peace talks.
It was the second time in four months that Abu Samhadana, 40, had survived an Israeli attempt to kill him. He escaped a missile strike on his car in August.
In a separate development, an Israeli rights group on Thursday confirmed that the country's prison service had ordered a Syrian-born Druze suffering from leukaemia and receiving chemotherapy to be shackled to his bed.
"We understand Israel's need to defend itself from attacks, but Israel should consider the consequences of its actions"
US State Department
Three guards watch over Hayal Abu Zaid, 37, who is shackled to his bed at Rambam hospital in the northern city of Haifa, within 15 minutes of draining chemotherapy treatment, Physicians for Human Rights-Israel said.
Mahir Talhami, a lawyer for the organisation who visited him in hospital, said the prisoner had both his legs and one of his arms handcuffed to the bed.
He said: "There really is no need. He is not going to run away or harm anyone."
Nevertheless, prison service spokesman Ofer Lefler said Abu Zaid, a Syrian-born Druze from the Israeli occupied village of Majd al-Shams, was shackled "because he is one of the terrorists".
Around 17,000 Druze, an offshoot of Shia Islam, live in four towns on the Golan Heights and have refused to relinquish their Syrian nationality since the strategic plateau was seized by Israel in 1967 and annexed in 1981.