Israel is threatening to expand its offensive unless Palestinian resistance groups release Corporal Gilad Shalit, an Israeli soldier abducted in a cross-border raid on June 25, and halt rocket fire on Israeli cities.
At least three militants were wounded in an early morning air strike near the Karni commercial crossing between the Gaza Strip and Israel, Palestinian paramedics and police said.
Israel also bombed a key bridge in northern Gaza, despite an appeal from the United Nations to stop destroying the strip's infrastructure.
Rocket strikes on Israeli cities continued on Sunday. In the latest attacks, a rocket landed in a street in the town of Sderot, wounding one person, the army said. Three others were hurt when a second rocket hit a house, rescue services said.
Earlier in southern Gaza, Israel bombed a militant training camp. No one was hurt. "It was being used to direct attacks," an army spokesman said.
Israel killed seven Palestinians, including a six-year-old girl and a police officer, on Saturday, Palestinian witnesses said.
Israeli army jeeps patrol along
the border in southern Israel
About 50 Palestinians and one Israeli soldier have been killed in the offensive, launched on June 28 to pressure the Hamas-led Palestinian government, already on the brink of financial collapse from a Western aid embargo, to help free Shalit.
Israeli tanks withdrew from much of the northern Gaza Strip on Saturday, but soldiers remain in the southern part of the territory and have deployed close to the outskirts of Gaza City.
"We will soon begin operations in other places," the Israeli military southern command chief, Yoav Galant, told Israeli media. "I see no reason to stop the offensive as long as they are holding our soldier."
Galant said that the Israeli offensive, criticised by the European Union and United Nations, had no time limit and that troops were prepared to continue it for "a month, two months and more if needed".
Kofi Annan, the UN secretary-general, called on both sides to exercise restraint and respect their obligations under international law.
"I am extremely concerned about the dangerous situation in the occupied Palestinian territory. I am appealing for urgent action to alleviate the desperate humanitarian situation of the civilian population," Annan said.
"The Israeli air strikes on Gaza's only power plant have had a far-reaching impact on Gaza's hospitals, flour mills, water and sanitation systems."
The Palestinian prime minister, Ismail Haniya, said Israel's withdrawal from the Gaza Strip and a halt to military actions could "make it easy for us to end the crisis" over Shalit.
Haniya inspected a destroyed
house in Beit Lahya in Gaza
The Islamist Hamas and other militant groups have demanded that Israel make the first move by releasing hundreds of Palestinian prisoners in exchange for the soldier. Israel has rejected this.
"Our intentions are to bring security for Israel citizens and to release Gilad," Galant said. "If someone expects us to play into the hands of the Palestinians, they are mistaken."