The Hamas-led Palestinian government has ordered armed fighters to stay off the streets of Gaza after a day of factional violence.
Crowds of Palestinians chanted slogans after Khalil al-Quqa's death
Three people died and at least 20 were hurt in fighting between Palestinian factions at the funeral of a senior militant commander.
Clashes erupted after Khalil al-Quqa of the Popular Resistance Committees (PRC) died in what appeared to be a car bomb.
The group accused security forces of working with Israel to kill Mr Quqa.
Israel denied any involvement in the attack.
Hospital officials said several of those injured after Mr Quqa's death were in a serious condition.
Two of those killed at the funeral in Gaza City were bystanders, they said, and a third was a PRC member who had been marching in the procession, the Associated Press news agency reported.
The violence came days after Israeli elections and the swearing-in of a Palestinian cabinet under the militant group Hamas.
Israel earlier launched air strikes on Gaza, apparently in response to Palestinian rockets being fired across the border.
In the West Bank, Israeli forces made several arrests and raided the home of a suicide bomber who killed four Israelis near a settlement on Thursday.
The violence highlighted tensions between factions loyal to Palestinian Authority President Mahmoud Abbas and followers of the newly-elected Hamas government.
The BBC's Alan Johnston, in Gaza, says relations between Palestinian security forces and armed groups can be extremely tense and there are questions as to how effectively Hamas will be able to control the various security agencies.
In the past, they have tended to be loyal to the Fatah political party, which Hamas has just ousted from power.
Immediately after Friday's attack in which Mr Quqa was killed, PRC members accused senior figures linked to the Palestinian security forces, including Samir al-Mushrawi, of collaborating with Israel to carry out the assassination.
The militants made their allegations at a press conference in the street near Mr Mushrawi's home. Shooting broke out shortly afterwards between his bodyguards and members of the PRC.
The gunfire was intense for several minutes, and there was panic in the streets as people fled for cover.
Our correspondent saw two injured bystanders being bundled into cars that sped them away to hospital. News agencies reported two children had been hurt in the incident.
Initial reports from witnesses said Mr Quqa was driving through the centre of Gaza City when his white saloon car was blown up by an Israeli missile and left ablaze.
However, the PRC later said they believed the vehicle was parked and that it had been packed with explosives, which were detonated remotely as he walked by.
Mr Quqa was a top commander in the military wing of the PRC, a group he had helped found, and was very well known in Gaza.
The PRC is often involved in launching home-made rockets into southern Israel. It made one such attack overnight, saying that it was hitting back against Israeli army actions in occupied Palestinian territory.
Despite Israel's official denial, Defence Minister Shaul Mofaz told reporters on Thursday that he had ordered the military to increase its pressure on militants who fired rockets into Israel.