The two men were killed early on Wednesday morning during clashes following an Israeli raid on the southern town of Rafah near Gaza’s border with Egypt.
Israeli soldiers killed the pair as they approached army positions in the town, an Israeli army spokesman said.
Residents told Reuters news agency that a large Israeli force had reached as deep into southern Gaza at the Rafah terminal, a crossing to Egypt that is Gaza‘s only access to the outside world without passing through Israel.
Aljazeera’s correspondent in Gaza said that Israeli tanks were deployed at the main gate of the crossing and it would be closed for several days.
Israeli forces also occupied Salah Al-Din road, linking the north and south of the coastal territory, the correspondent said.
Palestinian sources said Israeli troops had carried out house-to-house searches while bulldozers levelled agricultural land near the border.
West Bank raid
Meanwhile, in the West Bank, an Aljazeera correspondent said that Israeli forces, backed by about 40 military vehicles, had raided the town of Qabatya, south of Jenin, surrounding several houses.
Israeli soldiers have forced Palestinian men in the town to gather in a mosque and women in a school, the correspondent said.
Ghazi Hamad: A mixed cabinet
Earlier in the night, two Palestinian fighters also were killed by Israeli forces in the north of the Gaza Strip.
About 250 Palestinians, about half of them civilians, have been killed in Israeli operations in Gaza which began in June following the capture of an Israeli soldier by Palestinian fighters.
Israel says that Palestinian fighters have smuggled large quantities of weapons across the border from Egypt since Israel’s unilateral withdrawal from Gaza last summer.
Also on Wednesday, Israeli tanks and infantry took up positions on the border between Egypt and Gaza, killing two Palestinian fighters.
Israeli forces surrounded the Rafah border terminal and said they had uncovered five tunnels used for “smuggling arms”.
It is the first time since the Gaza pullout last summer that Israeli forces have patrolled the Egypt-Gaza border.
In another development, Hamas said on Wednesday that the current crisis between Hamas and Fatah could be solved through a new government of national unity.
Ghazi Hamad, a Hamas spokesman, said that a mixture of political, independent and technocratic personalities would be the best way forward.
The Hamas statement came in response to an earlier proposal by Mahmoud Abbas, the Palestinian president and head of Fatah, that an independent technocratic government was the best option available.
A number of leading personalities from the private sector have proposed the formation of an interim government featuring technocrats.