Israeli and Palestinian officials have blamed each other for the deaths of at least 11 people in an overnight raid on a refugee camp.
Palestinians say children were hurt
Palestinians accused the Israeli army of targeting Jabaliya in revenge for a suicide bombing on a bus hours earlier in Haifa which killed at least 15 people and injured 40 others.
They said an Israeli tank fired a shell into a crowd of civilians, killing at least eight people and injuring scores more.
But Israel said the operation was part of its ongoing campaign against militants and claimed most of the Palestinian deaths were caused by a bomb aimed at its troops.
Meanwhile, Palestinian sources said a member of the militant group Islamic Jihad was shot dead while trying to avoid being detained by Israeli troops in the West Bank city of Bethlehem on Thursday.
The Israeli cabinet has sealed off the West Bank and Gaza Strip from Israel and approved further operations against Palestinian militants following the bus attack in Haifa.
Mark Sofer, a senior Israeli foreign ministry official, told the BBC that the raid on Jabaliya was "absolutely and utterly not" a revenge attack.
He said Israel always took precautions to avoid civilian casualties in army operations, which he added were necessary because Palestinian security officials were not stopping attacks.
The raid in Jabaliya was carried out well after midnight when the only people roaming the streets are Palestinian killers
Israel believed all 11 Palestinians killed to have been militants, he said.
"The raid in Jabaliya was carried out well after midnight when the only people roaming the streets are Palestinian killers," Mr Sofer said.
"We would never dream of targeting innocent civilians in the same way as the Palestinians are doing towards us."
'Crowd fired on'
But Saeb Erekat, a senior Palestinian negotiator, disputed Mr Sofer's claims.
He told the BBC that four children under the age of 12 and five people aged over 55 were among the dead.
Mr Erekat said three people had been killed as troops in tanks backed by helicopter gunships entered the densely populated refugee camp in the north of the Gaza Strip.
This is an act of revenge
But the other eight died when a tank fired a shell at a crowd of people watching while firefighters tackled a building blaze, he said.
Israel has disputed that - saying that a bomb explosion targeted at Israeli forces caused the deaths.
Mr Erekat also said the raid was "an act of revenge" for the Haifa attack which Israel has blamed on a Palestinian suicide bomber who also died.
The victims of Wednesday's suicide bombing - the first in Israel since January - are still being identified from their remains.
A BBC correspondent says most appear to have been schoolchildren or university students.
Mr Erekat said the Palestinian Authority had condemned the bus blast and, as such, Israel's retaliation was unwarranted.
He added that the suspected bomber came from Hebron - a city under Israeli control - and not from Gaza.