"They heard three strikes in a row. It hit this area hard. Fear is as high as it can be here."
Tunnels 'a lifeline'
The tunnels are used by Gazans to smuggle food, fuel and consumer goods from Egypt and are considered a lifeline for thousands of ordinary Gazans. Israel says Hamas uses them to re-arm.
Shortly after the bomb attack on Tuesday, Israel aircraft killed one Palestinian on a motorcycle in an air attack.
Hamas confirmed that one of its members was injured in the attack in the town of Khan Younis.
The exchanges were the first major military developments since Hamas and Israel declared separate ceasefires earlier this month after Israel's offensive against the Gaza Strip.
Ehud Olmert, the Israeli prime minister, later said the killing was only an initial reaction and that Israel's full response was still to come, Israeli media websites reported.
No Palestinian group has claimed responsibility for Tuesday's bomb attack.