Israel frequently attacks armed groups in Gaza in response to the firing of rockets and mortars.

"The extremists in Gaza are trying to kill Israeli civilians. The Israeli operations are defensive and designed to protect our civilian population that has been the target of barrages of daily rocket attacks," Mark Regev, Israeli government spokesman, said.

Peace talks

The raid came the day before Abbas and Ehud Olmert, the Israeli prime minister, were due to hold their first talks since the long-stalled peace process was relaunched at a conference in Annapolis, Maryland last month.

In depth

George Bush, US president, has said that he wants an agreement on Palestinian statehood by the end of 2008, but big gaps remain on key issues and further clashes could complicate talks.

There is already a doubt over whether a settlement can be reached while control of the two Palestinian territories is effectively split between Hamas in Gaza and the Fatah faction of Abbas in the West Bank.

"The Israeli policy of escalation aims to sabotage and place obstacles before the negotiations even before they start," Nabil Abu Rdeneh, a spokesman for Abbas, said.

Hamas officials urged Abbas to put aside internal Palestinian rivalries and boycott Wednesday's talks.

"The hand of the enemy is still dripping with the blood of the martyrs," Taher Nunu, a Hamas spokesman, said. "It is a mark of shame to go to the negotiations tomorrow."

Palestinians detained

Witnesses said that Israeli troops cut traffic on Gaza's main north-south road and exchanged fire with Palestinian fighters.

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Soldiers took over the rooftops of several homes and detained about 60 people in house-to-house raids, residents said.

The Israeli military said they were detained for questioning.

Two soldiers were lightly wounded in Tuesday's clashes, according to the Israeli military.

Palestinian fighters could be seen carrying land mines and other weapons through the streets as schoolchildren were let out of school early so they could take refuge in their homes.

In the West Bank city of Nablus, a Palestinian fighter died when an explosive he was planning to use against Israeli troops detonated accidentally, local residents said. 

Hospital officials identified the dead man as a member of the al-Aqsa Martyrs' Brigades, an offshoot of the Fatah movement.

'Historic path'

The violence came a day after Olmert pledged to "forge a historic path" towards a final accord with the Palestinians in the first formal peace talks in seven years.

Palestinian fighters could be seen carrying
weapons on the streets of Rafah [AFP]
He warned that if Israel tries to maintain control over Palestinian territories, its future as a Jewish state is in jeopardy.

Olmert told a business conference on Monday that the stakes are high for Israel.

Answering critics who reject concessions to the Palestinians, Olmert said creation of a Palestinian state next to Israel is vital.

The Palestinians, however, are furious over Israel's announcement last week that it would build 307 apartments in the Har Homa neighbourhood in traditionally Arab east Jerusalem.

"The decision to build new housing units in Har Homa created a lot of problems for the credibility of the peace process," Saeb Erekat, Palestinian negotiator, said.