An Israeli military spokeswoman confirmed the strike on Tuesday, saying the car was carrying armed men from al-Aqsa Martyrs' Brigades, affiliated with the Fatah movement of Mahmoud Abbas, the Palestinian president.
She had no immediate word on casualties, but medical sources at Shifa hospital in Gaza City said that among the 10 wounded were seven children.
The sources named one of the dead children as Mohammed Jamal Roqa, a five-year-old boy. A seven-year-old girl who died was not immediately identified.
Hospital officials said that a 16-year-old girl also died of her wounds, and that among the other injured children, ranging in age from three to 12, three were in a grave condition.
Israeli officials said the aircraft fired missiles at a car in the crowded Jabaliya refugee camp in northern Gaza.
Witnesses said the people in the car jumped out before the blast.
The car exploded in a narrow street in the crowded refugee camp. The front of the car was badly damaged, but the back was intact.
Hundreds of Palestinians gathered around the vehicle, shouting slogans.
Aljazeera reported on Tuesday that al-Quds Brigades, the armed wing of Islamic Jihad, claimed responsibility in a videotaped military statement for four makeshift rockets fired at Sderot township in Israel, northeast of Gaza.
The firing was in retaliation to Israeli attacks, the statement said. The Israeli army has said rockets had landed near the town but caused no casualties.
In other developments, Israeli soldiers detained Mai Izzad Din Kayid, a mother of five and wife of the undersecretary for the Palestinian council of ministers' secretary-general, after they broke into her home in al-Bira, Aljazeera said.
Abbas wants Palestinian factions
to put a halt to firing of rockets
Her husband, Aziz Kayid, was arrested late last month by Israeli authorities and is still under interrogation.
Also on Tuesday, Mahmoud Abbas, the Palestinian president, called for a complete halt to firing of rockets at Israel.
Aljazeera said he demanded that Palestinian factions comply with the agreed conditions for "the period of calm", and requested the Palestinian higher follow-up committee to hold an urgent meeting to this end.