Palestinian security sources confirmed that the invasion of Rafah was ongoing, amid reports of a partial Israeli redeployment.
Nine people have been killed, including an eight-year-old child and 15-year-old boy, with more than 70 civilians injured, reported our correspondent.
“I am talking about a real massacre,” said Dr Muhammad Hasanin. “This is usually what happens when a mad army rampages through population centres.”
Israeli helicopters roared over the area, firing at civilian areas and injuring residents.
Israeli snipers continued to maintain rooftop positions, firing randomly at civilians and forcing residents to stay locked up within their homes, said our correspondent.
Occupation troops had demolished 60 homes in Rafah.
Israeli tanks fired at the electricity and water facilities, cutting off supplies to most of Rafah.
Overnight, Israeli soldiers shot dead a Palestinian activist near the Morag Jewish settlement in the occupied Gaza Strip. Troops opened fire after spotting “three suspicious figures”, said an Israeli military source.
Israeli officials said they found and destroyed three tunnels out of 13, allegedly used to smuggle weapons and drugs into Gaza, underneath the border with Egypt.
Palestinians dismissed Israeli claims.
“This is only a pretext. If they really came to destroy tunnels, why kill and maim a hundred innocent civilians? Why did they destroy all these homes?” said Rafah’s Palestinian governor Sufyan al-Agha.
Hamas representative in Lebanon, Muhammad Nizzal, said the United States had given Israel the green light for the Rafah invasion.
In an interview with Aljazeera, Nizzal urged the Arab and Muslim world to stand by the Palestinians.
Mourners carry the body of 12-
Chief Palestinian peace negotiator, Saib Uraikat, expressed concerns the operation could lead to a reoccupation of the Gaza Strip.
“We believe these are clear-cut crimes,” he said. “The Israeli government’s endgame is to destroy the peace process and to resume full occupation.”
Israeli officers said their operation had met with fierce resistance and that early on Saturday Palestinian fighters retaliated with mortar fire against Jewish settlements in the Gush Katif bloc.
Israeli military sources said a makeshift rocket fired from the Gaza Strip hit southern Israel on Sunday without causing injuries.
Hamas’ military wing Izz al-Din al-Qassam Brigades claimed responsibility for the rocket, which landed near the Israeli town of Sidrot town.
Aljazeera has received a statement issued by al-Qassam Brigades saying that targeting the Israeli town comes as a response to the Israeli offensive against Rafah refugee camp.
Hospitals under pressure
Palestinian security and medical sources told Aljazeera that many civilians might have been injured in their homes and could not be reached.
Rafah hospitals are not well equipped to treat large numbers of wounded, particularly because the city has been cordoned off for the seventh day running, preventing hospitals from receiving medical aid, they said.
Annan deplores killing
Hamas fighters battle occupation
Meanwhile, UN Secretary General, Kofi Annan, condemned the Israeli military action in Gaza.
“The secretary general deplores the killing of Palestinian civilians during the Israeli incursion into Rafah in the Gaza Strip,” said a statement issued by the United Nations.
“Not for the first time, the secretary general reminds Israel that the disproportionate use of force in densely populated areas is not compatible with international humanitarian law.”
Israeli troops also re-invaded the West Bank city of Jenin for the eighth consecutive day, reported our correspondent.
They re-imposed a strict closure on the population.
And near the West Bank city of Ram Allah, soldiers prevented hundreds of Palestinians working in Israel from returning to their homes late on Saturday.
They also fired tear gas and rubber bullets at professors and students trying to reach Beir Zeit University, reported our correspondent.