Israeli soldiers and Palestinians have fought heavy gun battles in Gazaafter Israeli tanks entered Palestinian-controlled territory.
Two Israeli army bulldozers and three tanks drove about 100 metres inside Palestinian-controlled territory to demolish a headquarters of Palestinian military intelligence in Rafah refugee camp, southern Gaza.
Fierce fighting ensued and local hospitals reported that more than 20 Palestinians were wounded.
The Israeli army, battling a nearly seven-month-old uprising for independence, said that earlier in the day its soldiers in the area, adjacent to the border with Egypt, had twice come under hand grenade attack, but suffered no casualties.
Israeli forces entered the Rafah area and demolished several houses which served as hiding places for gunmen firing at our troops, said Raanan Gissin, a spokesman for Prime Minister Ariel Sharon.
Palestinian witnesses said residents of the refugee camp, including children, threw stones at the tanks before gunmen and Palestinian police arrived to confront the Israelis.
On Wednesday, the Israeli army made its first major ground assault on a Palestinian-controlled area, demolishing houses in the southern refugee camp of Khan Younis which it said were used by gunmen.
In the Rafah camp, frightened residents fled their homes as the battle intensified and Israeli forces fired tank shells, missiles and heavy machineguns.
Earlier in the day, it appeared that a lull in violence had taken hold ahead of U.S.hosted security talks and a meeting between the Israeli and Jordanian foreign ministers planned for Monday.
The visit by Jordan's foreign minister, Abdulilah al-Khatib, will be the first to Israel by a Jordanian minister since right-winger Sharon came to power last month.
He brings to his meeting with Israel's Shimon Peres a first-hand account of talks last week in Washington between Jordan's King Abdullah and U.S. President George W. Bush as well as a meeting on Thursday which Khatib held with Palestinian leader Yasser Arafat.
After the meeting with Arafat, Khatib told reporters he had assured the Palestinian president that all efforts were under way to lift travel and other bans imposed on Palestinian cities by Israel.
Israel contends the so-called closures stem from security considerations. Palestinian leaders call the edicts collective punishment.
Monday's security talks are seen as crucial in keeping the violence down and even possibly setting the scene for a resumption of peace talks.
Sharon, who has vowed to restore security to Israelis in the face of the uprising that began last September, has said violence must end before peacemaking can begin.