John Ging, the head of Unrwa in Gaza, said the casualties in Thursday's convoy attack were Palestinian civilian contractors hired to bring supplies from the crossing points.
"They were co-ordinating their movements with the Israelis, as they always do, only to find themselves being fired at from the ground troops," he told Al Jazeera.
"We've lost confidence. We have been reassured continuously over the last number of days that these incidents will not reoccur, and I have taken that in good faith because of the humanitarian imperative.
"We want to believe we are safe here ... but the bottom line is that I've lost confidence in the Israeli side and that needs to be restored urgently, and it is their duty to restore this confidence," Ging said.
All convoys to Erez and the Kerem Shalom, which has been the main crossing point used for bringing humanitarian supplies into Gaza, were suspended after the incident.
The Israeli military said it was looking into reports of Thursday's incident.
Also on Thursday, Israel said it halted its military operations for three hours to allow humanitarian aid into the strip.
The lull also allowed 50 bodies to be recovered, raising the death toll of Palestinians in Gaza to at least 763, including more than 200 children, since the Israeli offensive began on December 27.
More than 3,121 people have also been wounded.
Eight Israeli soldiers and three civilians have died in the same period.
Explosions were heard in northern Gaza shortly after the three-hour lull, but even during the three hours, Israeli bulldozers crossed into Gaza and destroyed a number of houses, Al Jazeera's Alan Fisher, reporting from southern Israel near the border, said.
Thousands of Palestinians fled their homes in the southern Gaza Strip as Israeli forces bombarded Rafah earlier on Thursday.
|The Red Cross says Israel has failed to meet its humanitarian law obligations [Reuters]
Homes, a mosque and tunnels were hit in the area along the Egyptian border, witnesses said.
The Israeli military had dropped leaflets beforehand, warning it would "bomb the area due to its use by terrorists to [dig] tunnels and to stock up [on weapons]".
Hundreds of tunnels are believed to cross under the Egyptian border around Rafah allowing Palestinians to smuggle in daily necessities - in short supply due to the Israeli blockade – as well as weapons.
An Israeli army spokeswoman said the military had dropped the flyers "as in the past, to avoid civilian casualties".
But Al Jazeera's Ayman Mohyeldin, reporting from Gaza City, said the Israel had in effect cut the Gaza Strip in two and those in the southern part would not be able to go to the north seeking refuge and vice versa.
It was unclear if the latest offensive was the "third stage" of the offensive approved by the Israeli security cabinet on Wednesday.
A senior Israeli defence official said a meeting chaired by Ehud Olmert, the prime minister, had "approved continuing the ground offensive, including a third stage that would broaden it by pushing deeper into populated areas".
The International Committee for the Red Cross (ICRC) on Thursday accused the Israeli military of not helping wounded Palestinians in an incident in Gaza City that it described as "shocking".
ICRC and Palestinian Red Crescent workers said in a statement that several wounded Palestinians and four weakened children were found alongside 12 dead bodies in houses hit by shelling in Zaytun, less than 100 metres from Israeli positions.
"The ICRC believes that in this instance the Israeli military failed to meet its obligation under international humanitarian law to care for and evacuate the wounded," it said.
The Red Cross team, including four ambulances, had only gained safe passage from Israeli army to access the neighbourhood on January 7 after trying for four days, the ICRC said.