Israeli soldiers entered the central village of Absan during the early hours of Thursday morning, backed by a helicopter gunship, and killed three Palestinians fighters, all members of the al-Qidih family.
Two bystanders, including a boy believed to be 13 years old, were also killed, medical sources said.
Aljazeera's correspondent in the area said the three fighters were members of the Izz al-Din al-Qassam Brigades.
The Israeli army has confirmed that its forces were in the area, saying they were looking for facilities used by Palestinian fighters when troops fired on armed men who tried to attack them.
"This is an area believed to conceal tunnels and other forms of infrastructure used by terrorist groups," a spokesman for the army said.
Aljazeera said that operations were still going on in the area after the clashes and that 13 people had been injured, three of them seriously.
Palestinian fighters killed two soldiers and captured a third, Corporal Gilad Shalit, on June 25. Israel has since mounted several major military operations in Gaza which it says are intended to retrieve Shalit and stem cross-border rocket fire by Palestinian fighters.
About 230 Palestinians, half of them civilians, have been killed.
Israeli aircraft also attacked a house in the Jibaliya refugee camp overnight on Wednesday, according to Aljazeera.