Aljazeera correspondent Hiba Akila said one of those injured, whose identity was not immediately known, was in a serious condition.

"The shell has hit a building near the headquarters of the Palestinian national security in Jabalia refugee camp in northern the Gaza Strip," she said.

"The casualties were from the Palestinian national security."

The building was used as a collection point for unexploded Israeli shells fired into the northern Gaza Strip. The shells were later sent to another location to be disabled.

The Israeli army denied any involvement in the explosion. Israel has been firing shells into northern Gaza in recent weeks in an attempt to quell Palestinian resistance rocket fire.

The cause of the blast, which destroyed a one-floor building inside the compound, was not immediately known, according to Palestinian security sources.

Big explosion

Masud Salim, a security officer, said he was leaving the compound "when suddenly a big explosion shook the area and a big cloud of white smoke shot up.

"I heard the sound of screaming. Some of our police were in that section of the building.

"We don't know what happened, everything happened so quickly. The explosion was so loud and everything collapsed in less than a second," he said.

The blast killed at least two people, and rescue workers, using bulldozers to dig through the rubble, were searching for a third missing person, rescue officials said.