The Israeli military has shelled an area of Gaza City, following an attack by Palestinian fighters at the Nahal Oz crossing in the northern part of the territory.
Raed El-Erini, a spokesperson at the Al Shifa Hospital in Gaza, said that at least three people were killed when a house in the Al Shegaeya neighbourhood was hit.
Six people were reportedly injured.
Two Israeli civilians and two Palestinian fighters were killed in an exchange of fire after the Palestinians stormed the crossing, which is mainly used for the transit of fuel, earlier on Wednesday, Israeli police and medics said.
According to David Chater, Al Jazeera’s correspondent in Jerusalem, a fuel shipment had passed through the area when a barrage of mortar shells were fired. The fighters then broke through a fence and entered the crossing.
"An Israeli tank then fired at the Palestinians and two of the fighters were killed. Police said that two other Palestinians managed to escape back into Gaza," he said.
The Popular Resistance Committees, a part of the Islamic Jihad movement, was one of several groups that claimed responsibility for the attack.
Al Jazeera’s Jacky Rowland, also reporting from Jerusalem, said that Israeli authorities believe that the fighters tried to abduct Israeli soldiers in the area.
"Word has come out that the fighters that stormed the crossing had attempted to kidnap the Israelis that were working there," she said.
"This was a very audacious attack, and a serious breach of security," she said.
"Israeli security officials do not want a repeat of the abduction of Gilad Shalit (Israeli soldier captured last year)."
Rowland also said that there are reports of a state of emergency being declared along the Gaza border.
Shortly after the battle, an Israeli military aircraft hit a vehicle carrying Islamic Jihad fighters, in Gaza City, injuring three people, one of them seriously, according to Palestinian medics.
Israel has said that it will hold the Hamas movement, which took full control of the Gaza Strip last year, accountable for the attack at the Nahal crossing.
"Hamas clearly controls the Gaza Strip. They are directly responsible for this attack and we will hold them accountable," Mark Regev, spokesman for Ehud Olmert, the prime minister, said.
"The fact that Hamas would deliberately target the major crossing point for the import of fuel into the Gaza Strip in order to kill people and close down the terminal is a clear indication that Hamas has no concern whatsoever for the people of Gaza."
Meanwhile, a member of Hamas’s Izz al-Din al-Qassam Brigades and an Israeli soldier were killed in fighting during an Israeli incursion in the Gaza Strip, the army and Palestinian medics said.
"One soldier was killed and two others lightly wounded in an exchange of fire with armed men during an operation in the southern Gaza Strip," an Israeli army spokeswoman said.
"An Israeli unit entered the southern Gaza Strip on the edge of the security barrier and engaged armed men."
The spokeswoman said that 10 Palestinians were arrested in the raid and taken to Israel.
Islamic Jihad said in a statement that one of its members was also severely wounded in the exchange.
The military said it launched the raid on Wednesday morning near Khan Younis in response to shootings and other anti-Israel activity in the area of the border fence.
The Israeli air force also conducted air raids in the area in support of the operation that the army said was aimed at preventing attacks near the barrier between Gaza and Israel.
On Tuesday, an Israeli missile attack in northern Gaza killed a member of the Popular Resistance Committees. Another two people were wounded in the strike at a cemetery east of the town of Jabaliya.
During Tuesday’s operation, troops said they uncovered a tunnel shaft about 3.5m deep in a house near the border fence.
A similar tunnel was used by Gaza fighters who raided an army post on the border in June 2006 and captured an Israeli corporal, who is still being held by Hamas.
Since Israel and the Palestinians formally revived peace talks in November, at least 371 people have been killed, most of them Gaza fighters, according to an AFP tally.
(Aljazeera and agencies)