"There are reports that they may have detonated explosives around the house and there is also a belief that there may be a tunnel that has allowed some of the fighters to escape."
Scores of people were wounded in the fighting, several of them critically, medical officials said.
The clashes began after Musa, a local imam and leader of Al-Jamaa al-Salafiya al-Jihadya in Palestine (The Jihadist Salafist Group in Palestine), called for the establishment of an "Islamic emirate" in the Palestinian territories.
The group seeks a Palestinian legal system based purely on the sharia - Islamic law - and accuses Hamas of being too liberal. The group is said to have threatened to burn down internet cafes and to demand greater modesty on Gaza beaches.
"We are today proclaiming the creation of an Islamist emirate in the Gaza Strip"
Abdul Latif Musa, leader of Al-Jamaa al-Salafiya al-Jihadya in Palestine
"We are today proclaiming the creation of an Islamist emirate in the Gaza Strip," Musa had told worshippers at a Rafah mosque earlier, according to witnesses.
Musa said that if Hamas were to implement sharia he would immediately instruct his followers to comply with the movement's instructions.
An audience of several hundred men filled the mosque as Musa spoke, cheering and shouting in response to his address.
A spokesperson for the Hamas-run interior ministry dismissed Musas's comments and described him as mentally unstable.
In a statement, the ministry warned that those violating the law would be pursued and dealt with by the law.
"Everyone outside the law and carrying arms in order to spread chaos will be pursued and arrested," it said.
The ministry of religious affairs has previously asked Musa to resign his post, but he has repeatedly refused.
Mohyeldin said: "It is important to put this situation into the context of the discussion that has been going on here over the past week, and in fact for some time now.
|Heavily armed men accompanied Musa as he addressed worshippers at the mosque [AFP]
"There has been some criticism that Gaza has become a bastion or a safe place for a lot of foreign fighters ... and that is something that many here, in particular from Hamas, believe undermines Hamas's ability to rule."
Earlier on Friday, Ismail Haniyah, the de facto prime minister in Gaza, rejected Israeli allegations that non-Palestinians who had fought in Iraq and Afghanistan were crossing into from Egypt in order to set up bases in the territory.
"Such groups do not exist on the soil of the Gaza Strip ... there are no fighters in Gaza except Gazan fighters," he said.
Sami Abu Zuhri, a Hamas official, said that Musa's group, which two months ago attempted horseback attack on an Israeli base, "has no affiliation with foreign groups".