Twenty-two Palestinians and an Israeli have reportedly been killed in the bloodiest day of violence since Israel pushed into the Gaza Strip.
Palestinian civilians have been caught up in ferocious fighting
Many of those killed in the air strikes and heavy fighting are militants but there are also civilian victims.
Israel's operations, the biggest since it withdrew from Gaza last summer, began largely in the south in a bid to free a soldier captured by militants.
But troops moved deeper into the north after rocket attacks on a city.
Israeli officials deny any plans to reoccupy Gaza.
The interior minister in the Hamas-led Palestinian government, Said Siyam, has called on the security forces to fight Israeli troops.
But correspondents say the minister has limited influence with the security forces, who are mostly loyal to Hamas's rival movement, Fatah.
Veteran Palestinian negotiator Saeb Erekat said Israel's operations were undermining diplomatic efforts to free the soldier, Cpl Gilad Shalit.
Palestinian medical sources said 22 Palestinians had been killed and dozens injured in Gaza in the last 24 hours.
Israeli troops have suffered their first fatality in the operation
Militants armed with automatic rifles and rocket-propelled grenades have been fighting Israeli soldiers backed by tanks and helicopter gunships in street battles.
The fighting has focused on the towns of Beit Lahiya, Abassan and Khan Younis as Israeli tanks approach their outskirts.
An Israeli soldier was shot dead near Beit Lahiya, the army confirmed, marking the first military death of the offensive.
The army is trying to drive back Palestinian militants who fire crudely made rockets into towns in Israel just beyond Gaza's northern border, the BBC's Bethany Bell reports.
While the Israeli army says it is keen to avoid civilian casualties, Thursday's death highlights the dangers of fighting in urban areas, our correspondent adds.
In other developments:
- Israel closed the main goods crossing point with Gaza following what it said were alerts received about a planned attack
- Israeli police reportedly detained five senior members of Hamas in Jerusalem - police say they had been helping Hamas MPs conduct party activity in the city
- The UN human rights watchdog deplored Israel's campaign in Gaza as a breach of international law in an emergency resolution passed in Geneva.
Hamas's military wing has fired two Qassam rockets at Ashkelon in the last 48 hours, the first time Palestinian militants have hit a major Israeli city with their crudely made rockets.
The rockets did not cause serious damage or injury.
Ashkelon - more than 10km (seven miles) north of Gaza - was thought to be out of range of Palestinian rockets.
Israeli minister Binyamin Ben-Eliezer has insisted there is no wish to stay in Gaza.
For their part, groups like Hamas often say that their attacks are a response to Israeli military action - not just attacks on militants in Gaza, but raids, arrests and killings over in the occupied West Bank as well.
Every night since the militants captured Cpl Gilad Shalit, the Israeli air force has struck at sites in Gaza, including bridges and a power station.
Little is known about the fate of Cpl Shalit, captured in a cross-border raid by a joint militant force including fighters from Hamas, but Israeli officials believe he is still alive.