Witnesses said the two, Yasser Ashur Abu Atim and Mohammed Zaqzuq, were members of the armed wing of Islamic Jihad.

The men were driving in Rafah near the border with Israel late on Wednesday when their car was struck by at least one missile from an Israeli aircraft, the sources said.

The Israeli army confirmed that it had attacked the vehicle.

"We targeted two terrorists who were planning terrorist attacks against Israel in the near future," a spokesman said without giving further details.

In another incident late on Wednesday, a member of the armed wing of Hamas was wounded in a clash with armed men at Khan Yunus in the south of the Gaza Strip, witnesses said.

Fighting has been going on since Sunday between supporters of the Islamist Hamas and members of rival secular Fatah. The Palestinian government is led by Hamas, but the president leads Fatah.

Wednesday's clashes took place near the home of a Hamas political official, Yunes al-Astal, the witnesses said.

On Wednesday morning a local leader of Hamas was shot dead in the West Bank village of Hableh near Qalqiliya by masked armed men, a Palestinian security official said.

The assailants in a vehicle killed Mohammad Odah, 37, while he was on his way to a mosque, the official said.

The Palestinian territories have been struck by a surge of  violence between the ruling Hamas movement and Mahmoud Abbas's Fatah party that have left 11 people dead and scores injured since the weekend.