The dead men - identified as Faraj Najjar, 29, and  Ismat Moharra, 25 - were members of the Izz al-Din al-Qassam Brigades, the military branch of Hamas.

The Israeli army denied in a statement any shooting in the area.

An Israeli military spokeswoman said: "There was no attack by the Israel Defence Forces in the Gaza Strip."

Israel and Hamas have mostly observed a ceasefire that ended their December-January war in Gaza.

The killing of the Palestinians comes as Egypt and Germany try to broker the release of an Israeli soldier held by Hamas, in exchange for hundreds of Palestinians held in Israel's jails.

Gilad Shalit was captured by Hamas during a border raid in 2006.