The gunmen from al-Aqsa Martyrs Brigades, part of Palestinian President Mahmoud Abbas' Fatah group, said they were protesting after Suleiman al-Fara was taken away by men they believed to have come from the Preventive Security Service, an internal security agency set up by Abbas.
The service did not comment on the incident.
Detentions of Palestinians by security officials are often made discreetly, leading some to believe those detained have been abducted, Palestinian sources said.
The gunmen first took over a building in Khan Yunis owned by the Palestinian Red Crescent Society and then seized a municipal building nearby. Neither building was occupied.
Aljazeera reported that dozens of gunmen had stormed into the Palestinian Red Crescent compound while other gunmen spread out in surrounding streets, torching tyres and closing the shopping area.
Both incidents seemed to be the latest examples of factional rivalry in the West Bank and Gaza, part of a violent political culture that Abbas has vowed to combat.
"We will continue to carry out our protest activities and we are prepared to carry out things beyond imagination," said one gunman.
Fara is the director of the office of Faruq al-Qadumi, the chairman of Fatah and a Palestine Liberation Organisation leader who is currently living in exile.
Al-Qadumi said in a statement that Fatah would "take the roughest measures of conduct against the kidnappers and those who stood behind them if Fara was not released in 24 hours".
Tension between various forces in the Gaza Strip grew last week after Fatah activists began training what they called a Popular Army that they said would help to keep law and order.
Officials close to Abbas, under pressure at home and abroad to slim down security services and disarm burgeoning militia, had said the Fatah force did not have approval.
In another development, the problem of controlling the border crossings in Gaza Strip remained unresolved between the Palestinians and the Israelis.
Israel has proposed a three-party control body involving Egypt, Israel and Palestine for the Rafah crossing. Israel, meanwhile, plans to close down the crossings formerly designated for Israeli occupation soldiers and Jewish settlers, after the Gaza evacuation.