The children, all under the age of seven, suffered shrapnel wounds when one of the shells exploded in the yard behind their school in the al-Namsawi neighbourhood, Aljazeera's correspondent reports.

The army had no immediate comment.

One of the school's buildings was damaged in the attack, Samir Abu Shammala said.

The tank attack came after Palestinian resistance fighters fired a mortar shell at an Israeli target in the southern Gaza Strip, causing no damage or injuries, the army said.

"Following today's incident, the Izz al-Din al-Qassam Brigades of Hamas fired a number of mortar shells at the Israeli settlement of Navit Kalim, wounding six Israelis", Abu Shammala added.

Settlers said resistance fighters had fired two other projectiles at a settlement near Khan Yunus overnight.

Settlements are illegal under international law.

Israeli forces have remained deployed around Khan Yunus since Friday when they raided the vast refugee camp.

On Friday, Israeli troops killed a seven-year-old Palestinian girl in southern Gaza. Rania Siam died of a bullet wound to the head.

Aljazeera learned that the incident took place when Israeli forces fired randomly at Palestinian homes.

The firing of mortar shells and rockets at settlements in Gaza and nearby towns in Israel has threatened Israeli Prime Minister Ariel Sharon's plan to withdraw from the Gaza Strip next summer.