The army said its invasion into the Shijaiya neighbourhood was aimed at seeking out tunnels and explosives that could be used in attacks.
Two fighters from the governing Hamas group were killed during the operation, which began on Saturday.
Taruq Halas, 21, was killed by an Israeli tank shell during an incursion near the Karni crossing point east of Gaza City. Six other people were wounded.
Waleed al-Harazin, 25, was killed by an Israeli missile during a helicopter raid on eastern Gaza City.
Hamas’ armed wing said in a statement that both men were its fighters.
The Israeli army said that both were targeted in air strikes, one because he was carrying an anti-tank rocket.
Among seven Palestinians wounded were two journalists caught in the missile strike on the Reuters vehicle.
Fadel Shana, a Reuters cameraman, regained consciousness in hospital.
Since June, at least158
He was also hit in the hand by shrapnel.
Sabbah Hmaida, who works for a local news website, was wounded in the legs.
The Israeli army said the vehicle was hit because it was acting suspiciously in an area of combat and had not been identified as belonging to the media.
Captain Noa Meir, an army spokesperson, said: “During the operation, there was an aerial attack on a suspicious vehicle that drove in a suspicious manner right by the forces.
“This car was not identified by the army as a press vehicle,” she said.
“If journalists were hurt, we regret it.”
The missile struck the vehicle after dark.
The armoured car was clearly labelled as a media vehicle, with signs on all sides, including the roof.
“This incident is totally unacceptable and we urge a careful examination of how this happened to ensure there is no repeat”
Michael Lawrence, Reuters managing editor for Europe, Middle East and Africa
A hospital official said that a woman and a child were also injured in the attack.
Michael Lawrence, Reuters’ managing editor for Europe, Middle East and Africa, said: “We are deeply concerned at this attack on a clearly marked press vehicle as journalists were doing their job to report the story from Gaza.
“We understand that the army says it had no intention of targeting the media, but this incident is totally unacceptable and we urge a careful examination of how this happened to ensure there is no repeat.”
Off the Gaza Strip, meanwhile, a fisherman was seriously wounded late on Saturday by fire from an Israeli gunboat.
An Israeli army spokeswoman said warning shots had been fired as the boats were too far from the shore.
Gaza fishermen have been forbidden from taking to the sea because of fears they could be involved in arms trafficking.
Since June 28, when Israel launched a massive offensive in Gaza to recover a captured soldier and stop rocket attacks, at least 185 Palestinians have been killed.
The latest death brought to 5,346 the number of people killed since the start of the Palestinian uprising in September 2000, most of them Palestinians, according to an AFP count.