A suspected local leader of Islamic Jihad was reportedly among four people killed during an Israeli raid in Gaza.
Palestinian witnesses and medical staff said Yasser Abu al-Aesh was shot dead in a battle with Israeli soldiers in Rafah along with three other militants.
Israeli army sources said the men opened fire and threw a grenade as soldiers approached the men's house.
Al-Aesh, who had lost three limbs in a bomb-making accident, was reportedly high on Israel's wanted list.
The house where the men had been staying in the Rafah refugee camp was completely destroyed.
At one point in the fight al-Aesh and his brother ran out of ammunition, Palestinian witnesses told the Associated Press news agency.
There are conflicting reports as to how al-Aesh lost his legs and arm last year.
Some reports say a rocket he was building exploded prematurely; others say an Israeli tank shell hit his rocket firing team, maiming him and killing his comrades.
The troops, who had been supported by helicopters, later withdrew from the area.
On Sunday Israeli Defence Minister Shaul Mofaz said a warning from the spiritual leader of the Palestinian militant group Hamas that its members would try to kidnap Israeli soldiers meant Israel had to strike at militant leaders.
"[Sheikh Ahmed] Yassin's statement makes it more imperative for Israel to attack the heads of Hamas and the Islamic Jihad," Mr Mofaz said.
More than 2,600 Palestinians and at least 875 Israelis have died since the outbreak of the Palestinian uprising in September 2000.