Israeli tanks and bulldozers have been moving into part of the Rafah refugee camp as the army begins a new offensive against Palestinian militants.
A Palestinian weeps over the body of a man killed by a missile strike
Palestinians say overnight 13 people died in missile strikes and fighting.
Thousands of panicking residents have been fleeing, fearing that the Israelis will demolish more homes in the camp.
Israel's operations have caused an international outcry, but the Israelis say their aim is to attack militants and destroy arms-smuggling tunnels.
The Israeli military says the operation - which it
dubbed Operation Rainbow -
is not a hit-and-run mission but will continue as long as necessary to achieve its aims.
Palestinian officials have called for more international pressure on Israel to stop what they describe as an escalation in Rafah camp.
"We now require the international community and the UN in particular to take the necessary practical steps to stop this Israeli campaign of killing Palestinians and demolishing their houses," said Labour Minister Ghassan Khatib.
RAFAH REFUGEE CAMP
Largest of several camps near city of Rafah, southern Gaza
Established in 1949 to house 41,000 refugees from newly-founded state of Israel
Expanded in 1967 when Gaza occupied by Israel
About 1,800 houses demolished by Israeli army since 2000
Correspondents say Israeli moves early on Tuesday appeared to signal an effort to widen a military patrol road between Rafah and the Egyptian border.
The army launched its operations last week after Palestinians blew up an armoured vehicle, killing five soldiers.
The Israeli military has since destroyed almost 100 houses in the camp, located at the southern tip of the Gaza Strip, leaving 1,100 people homeless.
Israeli forces have threatened to bulldoze more houses, but deny plans for a systematic destruction of homes.
Amnesty International has said Israel's demolition of homes is a war crime.
Witnesses in the outlying district of Tel Sultan reported on Tuesday morning that tanks and bulldozers were in operation there, digging a trench to separate it from the rest of Rafah. They said troops had taken over high buildings and were conducting house-to house searches.
Overnight, helicopter gunships launched two attacks, including one which hit a mosque in Tel Sultan. The BBC's Alan Johnston, reporting from Rafah, said the gunships were continuing to circle the area during the morning.
Palestinians said at least 12 people died in the missile strikes and fighting overnight.
Israel says the missile strikes targeted armed militants. Medical sources said two of the three men killed in the first attack were gunmen, while the militant group Hamas said three of those killed in the second strike were its members.
But civilians were also injured in the attacks. Palestinian security sources also told AP news agency two ambulances came under fire from Israeli snipers, and one was hit by three bullets.
A 13th man was reported killed on Tuesday morning when a bomb he was planting exploded prematurely.
Scramble to save homes
Forty-five Palestinians have presented an
appeal to the Israeli supreme court against the destruction of their homes.
Lawyer Ussama Saadi said representatives of the families had contacted the army to ask what they intended to do with their houses but the army had "refused to respond".
On Monday, Rafah residents prepared frantically to leave the camp, fearful that their homes might be among those marked for destruction.
Through the afternoon they raced to save their possessions. The BBC's Alan Johnston describes donkey carts being loaded with old fridges, carpets and cupboards.
Thousands left the camp, until the Israeli army sealed it off, saying it wanted to prevent militants slipping out among the fleeing civilians.
About 400 tents set up last week in schools and public squares in Rafah camp are already filled with those made homeless over the weekend.
Israel's Supreme Court lifted a temporary injunction on Sunday that banned the military from destroying any more homes in Gaza, saying the army was entitled to act in self-defence.
The army says buildings marked for demolition are used to launch attacks by Palestinian militants, who also smuggle weapons through tunnels under the border.
The human rights group Amnesty International has released a report in which it accuses Israel of destroying more than 3,000 homes in the last few years of violence, making thousands of Palestinians homeless.
The organisation says that some of Israel's house demolitions amount to grave breaches of the Fourth Geneva Convention and are war crimes.
"In the vast majority of cases, it's wanton
destruction," said Donatella Rovera, from Amnesty's Middle East
programme. "It's unnecessary,
disproportionate, unjustified, and deliberate."
There has been widespread international condemnation of the demolitions, described by the Palestinian cabinet as tantamount to "ethnic cleansing".
Israeli officials said house demolitions were among the measures the army took to protect security and were carried out "in full compliance with International Law, while making earnest efforts to uphold the rights of Palestinians not involved in terrorism".