Israeli forces killed at least five Palestinians in a Gaza refugee camp battle while Palestinian mediators tried to end a leadership crisis prompted by Prime Minister Ahmed Qurie's threat to quit.
Citing what it called plans by Palestinian militants to obtain anti-aircraft missiles; dozens of armoured vehicles, tanks, and infantry - backed by attack helicopters - entered the Rafah camp on the Gaza-Egypt border.
As the forces searched for what they said where tunnels used for arms smuggling, a gunfight ensued in which at least five Palestinians were killed and around 35 people - among them eight children - were wounded.
An Israeli commander said troops were searching for about a dozen cross-border tunnels.
The officer, identified by Israel Radio only as Brigadier-General Ofer, said his men met "tough resistance" from Palestinians firing anti-tank rockets and hurling grenades.
The al-Aqsa Martyrs Brigades, an armed wing of Palestinian leader Mr Yasser Arafat's Fatah faction, said its fighters detonated several land mines beneath armoured vehicles and bulldozers.
An Israeli field commander said one soldier was wounded by shrapnel.
Meanwhile, newly-appointed Palestinian Prime Minister Ahmed Qurie maintained a public silence in his dispute with Mr Arafat over his power over security forces.
Palestinian officials said Mr Qurie threatened to resign after a session of parliament, called yesterday to ratify an emergency government, was cancelled amid opposition to the formation of a crisis cabinet.
"Mediation efforts will continue to narrow differences between Abu Ala (Qurie) and President Arafat," a Palestinian official said.
Mr Qurie and Arafat were at odds, officials said, over the president's decision to dismiss Interior Minister Mr Nasser Youssef, who would have security powers crucial to the internationally-backed peace "road map" stalled by violence.
Mr Youssef angered Mr Arafat by boycotting a cabinet swearing-in ceremony on Tuesday. Palestinian sources said he had not wanted to take up his duties without a parliamentary vote to lend legitimacy to any security measures he might implement.
Mr Arafat's reluctance to yield security control was a major factor behind the decision by Mr Qurie's predecessor, Mahmoud Abbas, to resign as prime minister last month.
Israel has demanded that Qurie's government crack down on Islamic militants behind a wave of suicide bombings against Israelis in a three-year-old uprising for statehood.