At least eight Palestinians have been killed in an Israeli raid in the southern Gaza Strip, Palestinians say.
Rafah has been the scene of frequent clashes
Witnesses said about 40 tanks and armoured vehicles entered Rafah refugee camp on the Gaza-Egypt border.
Israel says the operation was aimed at destroying tunnels used to smuggle explosives from Egypt into Gaza.
Hours earlier two Israeli army officers died in an ambush in the central Gaza Strip, making it one of the bloodiest days in the region for months.
It also came in the wake of the first visit to Israel for two years by Egypt's Foreign Minister Ahmed Maher, who was hoping to revive the deadlocked Israeli-Palestinian peace process.
But his talks were overshadowed when he was assaulted at al-Aqsa mosque in Jerusalem - an incident that highlighted the difficulty of his mission.
Israeli police later detained seven Palestinians in connection with the assault.
Israel has sporadically targeted Rafah to try to disrupt attempts by Palestinians to smuggle weapons across the border through a network of tunnels.
At least 20 Palestinians were wounded, four seriously, in the raid in Rafah, during which several houses were damaged, Palestinian security sources said.
The dead reportedly included a 50-year-old man and a member of the armed wing of the radical Islamic Jihad movement.
An unnamed Israeli military source told Reuters news agency that soldiers had opened fire at Palestinians trying to plant or detonate an explosive device.
Witnesses said gunmen fired at troops as they entered the camp.
Doctors say in Gaza say there are civilians among the dead.
The raid has been condemned by United Nations Secretary General Kofi Annan, who "urges the government of Israel to refrain from such violent actions and return to peaceful negotiations," his spokesman said.
The Palestinian militant group Al-Aqsa Martyrs' Brigades, which lost two militants in the raid has vowed to take revenge inside Israel, Reuters reports.
"Blood for blood and killing for killing," chanted thousands of Palestinians at funerals for those killed in the raid.
An Israeli army spokesman said 40 tunnels had been found and destroyed since the start of the year.
A senior Palestinian envoy, Faruq Qaddumi, has gone to Cairo to apologise for the assault on Mr Maher.
"This group has nothing to do with the Palestinian people, which has the greatest respect for the Egyptian people and the sacrifices made by Egypt and her martyrs who have fallen for the Palestinian cause," he said.
He also accused Israel of being behind the incident.
Mr Maher needed hospital treatment after radical Palestinians pelted him with shoes at al-Aqsa Mosque, but he later returned to Egypt and dismissed the incident as "a piece of foolish behaviour".
He visited the mosque after a series of meetings with senior Israeli officials, including Prime Minister Ariel Sharon and Foreign Minister Silvan Shalom.
Correspondents say his assailants are likely to have been angered by the talks between the minister of an Arab Muslim nation and Israel, which they regard as an illegitimate state on Arab land.
Egypt and Jordan are the only Arab countries to have diplomatic relations with Israel, but relations have been strained since the start of the Palestinian intifada in September 2000, when both countries withdrew their ambassadors.
Egypt hosted talks earlier this month to try to negotiate a ceasefire offer from Palestinian militants, but the talks ended without a deal.