Up to 10 fighters confronted the Israeli forces and used explosives against one of the Israeli units in the attack, according to Israeli military sources.
Al Jazeera's correspondent in Gaza reported that Israeli aircraft fired several missiles in the direction of the confrontation.
No soldiers were reported to have been killed.
Residents said the Palestinian fighters fired anti-tank weapons and set off explosives.
Ismail Haniyeh, Hamas' leader in the Gaza Strip, said the Israeli attack on Palestinian fighters showed their intentions towards disrespecting the direction of Palestinians towards a "tahidya" or calm in a mutual and comprehensive way.
"Those martyrs and this blood will not break the will of the Palestinian people," he said on Sunday.
Yigal Palmor, an Israeli foreign ministry spokesman, said on Sunday: "Hamas is, by it's actions and by it's inaction causing the plights of the residents of Gaza, and this is something the Palestinians must know.
"As long as the border crossings are not secure there is no point in even raising the question of their opening."