Al Jazeera's correspondent in Gaza reported that a number of Israeli military vehicles, backed by helicopters, raided Khan Younis' eastern Farahin district.
The vehicles raided the area amid intensive and indiscriminate gunfire at Palestinian citizens' houses, he reported.
Eyewitnesses told the correspondent that a group of Israeli special forces infiltrated the district before the raid and had occupied a number of civilians' houses, turning them into military bases.
An Israeli army spokeswoman said "terrorist threats and rocket-launching infrastructure" were the target of the raids.
Israeli troops shot several Palestinian fighters who had struck an Israeli armoured vehicle with an anti-tank rocket, she said.
Israel has tried with little success to stop frequent rocket fire from Gaza, which the Israeli government last month branded a "hostile territory".