Israeli tank shells have killed at least five Palestinians and wounded 30 in the Gaza Strip after an apparent attack on an Israeli army patrol in the border area, Palestinian medics and local witnesses said.
The casualty toll in Saturday's violence was one of the highest in a single incident in Gaza in recent months. At least five of the injured, some of them children, are in critical condition, medical sources said.
There were reports early Sunday morning that Palestinian militants had fired rockets into Israel in retaliation, with at least six landing in towns near the Gaza Strip. Israeli media reported four people lightly injured.
Binyamin Netanyahu, the Israeli prime minister, threatened further retaliation on Sunday morning if the rocket fire continues.
"The world must realise that Israel won't sit by idly in the face of attempts to attack us. We are prepared to escalate our actions," he said at the start of his weekly cabinet meeting.
Residents said a crowded mourning tent in the Shijaia neighbourhood near Gaza City was full of people paying respects to a bereaved family man when a shell struck.
Ambulances, private vehicles and motorbikes rushed the wounded to hospital, eyewitnesses said. Among those killed was an 18-year-old man.
"The occupation's targeting of civilians was a grave escalation that must not pass in silence," Hamas spokesman Fawzi Barhoum said.
"Resistance must be reinforced in order to block the aggression."
The Israeli army opened fire with tank shells hitting an urban area east of Gaza City after Palestinian fighters fired anti-tank missiles at an Israeli border patrol, according to Israeli sources.
The Israeli army confirmed that troops had been targeted by an anti-tank missile along the border.
"An anti-tank rocket was fired at Israeli soldiers during a routine patrol along northern Gaza. They responded to the fire," a spokeswoman said.
Military sources said four soldiers were wounded, two of them seriously, while army radio said the jeep was blown up. The military did not immediately confirm either report.
The attack was claimed by the PFLP's armed wing in a statement, which said its fighters had fired two anti-tank rockets at Israeli troops.
In a separate incident at another location, one person was wounded in an Israeli air strike in the town of Khan Younis.
'Further military response'
The clashes took place during a period of increased tension along the Israel-Gaza frontier.
On Thursday, an Israeli soldier was wounded east of Khan Yunis when a tunnel packed with explosives was detonated in an attack claimed by Hamas's armed wing, the Ezzedine al-Qassam Brigades, hours after a Palestinian teenager was shot dead by troops in the same area.
The armed wing of the Popular Resistance Committees in Gaza released a statement vowing that "the Zionist enemy will pay a high price for this crime against Gaza".
And Islamic Jihad also issued a warning, saying: "Every aggression against the Palestinian people will be followed by a response from the resistance."
An Egypt-brokered ceasefire went into force in the border zone on October 24 after 72 hours of bloodshed in which air strikes killed eight Palestinian fighters and armed groups fired more than 100 rockets at Israel, wounding three people.
The Gaza Strip, a coastal territory crowded with more than 1.5 million people, many of them refugees, has been under siege by Israel since 2007 after Hamas took over power from Fatah.