Israel has said it plans to destroy hundreds more Palestinian homes in the Gaza Strip after Israel's Supreme Court said demolitions could go ahead.
Tents have been set up for those made homeless
Defence Minister Shaul Mofaz said the army meant to create a "new reality" on the border between Gaza and Egypt.
Washington has joined the UN and other bodies in expressing concern at the possibility of further demolitions.
Meanwhile, Israeli helicopter gunships have attacked offices of Palestinian organisations in Gaza City.
It was the third night in succession that buildings in the area were targeted by missiles fired from helicopter gunships.
And Israeli forces say they have killed three gunmen who tried to cross from central Gaza into Israel.
A tank fired a shell at the group near the Beeri Kibbutz, setting off explosives they were carrying, the Israeli newspaper Haaretz reported on its website.
UN relief officials estimate that Israel has destroyed more than 80 buildings in the Rafah refugee camp during the past few days, leaving about 1,100 Palestinians homeless.
Sunday saw the Supreme Court lift a temporary injunction banning the military from demolishing any more homes, ruling that the army was entitled to carry out demolitions for reasons of self-defence.
The Israeli military says militants have used the homes as shelter from which to attack troops patrolling the 50-metre wide (160 feet) border with Egypt, known as the Philadelphi Corridor, and as cover to smuggle weapons through tunnels from Egypt.
Israeli Chief of Staff Lt Gen Moshe Yaalon told an Israeli cabinet meeting that hundreds of Palestinian houses had been targeted for demolition.
Dozens of Palestinians reportedly started to evacuate their homes in the Rafah camp after the court issued its ruling.
"I don't know what to take. I will start with clothes or the refrigerator or the television," said Abed al-Majid Abu Shamala, 52, preparing to leave a four-storey building.
There has been widespread international condemnation of the Gaza demolitions, described by the Palestinian cabinet as tantamount to "ethnic cleansing".
The head of the United Nations Relief and Works Agency for Palestinian Refugees (UNWRA), Peter Hansen, said he was "extremely alarmed" at the "collective punishment".
US Secretary of State Colin Powell, voicing rare criticism of Washington's closest Middle East ally, said that although Israel had the right to defend itself, the US did not think the demolitions were "productive".
"We know Israel has a right of self-defence but the kind of actions that they're taking in Rafah with the destruction of Palestinian homes we oppose," Mr Powell said at the World Economic Forum in Jordan.
Mr Powell also rebuked Palestinian leader Yasser Arafat for this weekend urging Palestinians to "terrorise the enemy".
He said Mr Arafat was making it "exceptionally difficult" to move the peace process forward.
Pressure to leave
More than 100,000 Israelis attended a rally on Saturday night calling for an Israeli withdrawal from the Gaza Strip.
The demonstration in Tel Aviv was organised to show support for Israeli Prime Minister Ariel Sharon's pullout plan, which has been rejected by the ruling Likud Party.
Labour leader Shimon Peres told the demonstrators that Israel would "say good-bye to Gaza".
The rally organisers claimed it was one of the largest protests of its kind since the demonstrations against Israel's invasion of Lebanon in the 1980s.