Nour Odeh, Al Jazeera's correspondent in Gaza reported that two shepherds had also been killed by Israeli tank shells in the north east of the Gaza Strip.
Israeli warning
Israel also threatened on Saturday to go after sensitive Hamas targets in an effort to halt rocket fire from Gaza.
Amir Peretz, the Israeli defence minister, told Israel Radio that Tel Aviv would leave open the possibility of strikes against the group's political and military leaders.
"The Palestinians need to understand that Hamas is leading them into disaster, a real disaster.
"It is our intention to act against Hamas," Peretz said.
Asked whether Ahmed Jaberi, the head of Hamas' military wing, and Ismail Haniya, the Palestinian prime minister, could also be targets, Peretz said he would not rule out any action that "makes it clear to everyone that we don't intent to allow anyone to harm Israeli citizens."
Palestinians said that Saturday's Gaza City targets were metal foundries with no connection to Hamas.
Warning
In response to the intense Israeli air assault, Hamas's armed wing has threatened to resume suicide bombings in Israel. A Hamas bomber last struck in Israel in 2004.
"If they will resume suicide bombings, we will retaliate with a siege on Gaza," a senior Israeli official told Reuters on condition of anonymity.
The army said at least one rocket fired from Gaza landed in Israeli territory on Saturday morning, causing damage to a home but no injuries.
Meanwhile, Mahmoud Abbas, the Palestinian president, spoke by phone with Hamas' exiled leader in a new bid to end Gaza's factional fighting.
Also on Saturday, armed men clashed near Gaza City's Islamic University, a Hamas stronghold, and two Fatah fighters were injured.
In northern Gaza, where Israeli tanks patrol the edge of the coastal strip to push back rocket squads, one man was wounded by tank fire, hospital officials said.
The weeklong Hamas-Fatah fighting has killed more than 50 Palestinians and wounded dozens.
Abbas and Haniya, the most senior Hamas politician in Gaza, have failed to make a cease-fire stick, suggesting that they have largely lost control to the gunmen and their political patrons.
The Palestinian president spoke late on Friday to Damascus-based Khaled Meshaal, the supreme Hamas leader, who urged senior Hamas and Fatah officials to meet.