Security sources say Israeli troops entered the Gaza Strip and shot dead a Palestinian in clashes with gunmen.
Relatives of the slain man gathered outside Beit Hanoun hospital
Five military vehicles penetrated 500 metres into farmland, sparking sporadic gunfights, Palestinian sources said.
The Israeli army says it carried out a limited incursion to stop militants planting a bomb near the border.
It is the first ground incursion into Gaza since a shaky November ceasefire and comes days after Israel signalled a change of tactics against militants.
Defence Minister Amir Peretz pledged that Israel would not allow the Palestinian militant movement Hamas to strengthen in Gaza and said the army was preparing for "any scenario".
Wednesday's incident happened near Beit Hanoun, in northern Gaza - an area from which Palestinian militants have frequently fired rockets towards Israel.
Israel says militants have fired 155 rockets since the ceasefire was agreed.
Reports quoting Palestinian officials said the army prevented ambulances from evacuating people wounded in the clash, including two farmers.
The Islamic Jihad militant group said one of its members - Ramez Zanin - had been shot dead by Israeli troops as he was trying to plant an explosive in the path of oncoming tanks.
An Israeli military spokesman said the army carried out the incursion after it had observed three militants attempting to plant an explosive charge close to the border fence.