Thousands of people fled Gaza's eastern district of Shujayea as heavy bombardment from the Israeli army continued into the morning, with the Palestinian death toll over the last 13 days reaching 400.
The Palestinian enclave was hit overnight with the heaviest barrage of tank shells since the beginning of Israel's offensive against Hamas on July 8. The eastern neighbourhoods of Shujayea, al-Shaaf and al-Tuffa were worst hit.
In the early afternoon on Sunday, Israel agreed to observe a two-hour humanitarian ceasefire in Shujayea to allow the evacuation of the wounded, but it was broken less than an hour after it was announced.
Israel's military said its forces were shot at shortly after the two-hour truce, facilitated by the Red Cross, had begun at
1:30pm (10:30am GMT), and that it had resumed combat operations.
The Palestinian Hamas movement said earlier that it would abide by a temporary truce.
Al Jazeera's Stefanie Dekker in Gaza witnessed desperate civilians making their way into Gaza City in the morning.
"While driving into the bureau, we were met by hundreds of people on foot carrying their children, carrying plastic bags filled with whatever belongings they could take with them. They couldn't leave during the night," our correspondent said.
Dozens of bodies were brought to hospitals from Shujayea on Sunday morning, and more are expected to arrive after ambulances could access the neighbourhoods.
Those killed included the son of senior Hamas leader Khalil al-Hayya, Osama, his wife Hala and their two children.
A Shujayea resident who reached a hospital told Al Jazeera: "It is a massacre taking place in Shujayea. It is a massacre with the full sense of the word, committed by Israel against innocent civilians, there are no armed men among us, the streets of Shujayea are packed with dead bodies."
Ibtessam Batniji, 29, was walking in the street, looking in vain for a taxi with her children.
"We did not sleep, bombing was everywhere," she told Al Jazeera. "I don't know where will we go," she said as bombs continued to drop.
"Children are scared. We wanted to leave earlier, but we did not dare to go out in the dark. It was like a ghost town, the smell of death and the sound of shooting and shelling everywhere."
Israel launched its offensive in response to rockets fired from Gaza and says it is targeting military installations of Hamas and other armed groups. However, the vast majority of those killed and injured are Palestinian civilians, many of them children.
Israel announced on Saturday that four of its soldiers were killed in combat with Palestinian fighters, bringing the total death toll on the Israeli side to seven.
'Heavy psychological impact'
Waleed, a resident of Gaza's eastern al-Shaff area, told Al Jazeera that he was terrified and stuck with his family of 18 members in a single room and had nowhere to go while Israeli shelling continued through the night.
"We can hear shells and rockets fall on our streets and homes. They're falling everywhere," he said.
"We have no electricity, everything has been cut off. The Red Cross can't reach the area - it's too dangerous. People are stuck at home. All we hear is shelling."
Mads Gilbert, a Norwegian doctor working at Gaza's al-Shifa hospital, told Al Jazeera that most of the casualties brought there were civilians who suffered shrapnel injuries and amputations.
"It's very disturbing to see the large number of civilians, particularly the children. What is remarkable with the Palestinians in Gaza is the resilience. They don't give up, they stand tall. I'm amazed to see the calm and coherence in the community and in the hospital among the [hospital] staff."
He said that three medical doctors had their homes shattered by Israeli attacks late on Saturday.
"What [Palestinians] are [saying] is that how can the world accept the Israelis targeting civilians in an area which is completely shut off? There are no shelters, no early warning systems, no sirens. The population is basically completely naked to the enormously strong Israeli military machine."
Israel controls land crossings, sea and airspace around Gaza, leaving most of the 1.8 million residents with nowhere to go.