Israeli forces killed two Gaza militants and a West Bank Palestinian youth who had approached soldiers brandishing a gun which later turned out to be fake, Palestinian sources and the army said on Monday.
In Gaza city, an Israeli helicopter fired a missile at a car killing both of its occupants, Palestinian security sources said. The governing Islamist Hamas group identified the two men as Abdel-Qader Habib and Basil Abeid, two local commanders of the organisation.
An Israeli army spokesman confirmed that an air strike was aimed at a vehicle carrying "terror operatives" in Gaza City.
A military source said that Habib was involved in manufacturing and launching makeshift rockets into Israel.
Local witnesses said that two young children standing nearby in the Shijaia neighbourhood in the eastern part of Gaza City were wounded by the explosion, which totally destroyed the car.
It was Israel's latest strike against militants since it began an offensive in Gaza in June after gunmen from the area abducted an Israeli soldier in a cross-border raid.
Defence Minister Amir Peretz said on Monday night that Israel was continuing to fight against militants who fire rockets into Israel from Gaza, but said there were no plans to reoccupy the area Israel quit last year.
"I emphasise that our hand is outstretched in peace, but anybody who rejects it should know that we will do all we can to sever the hand which uses terror."
"We have no intention of making concessions to anybody, we have no intention of being dragged in to reoccupying Gaza, but we have every intention of protecting our citizens," he added.
Israel has killed more than 320 Palestinians in Gaza, about half of them civilians, since it began its assault.
After the strike, with the Israeli helicopters still hovering above, scores of residents streamed to act as a "human shield" to save a house which the military was threatening to destroy with a missile, residents said.
The army said it was checking the report.
It was the second such event in two days. On Sunday the Israeli air force cancelled a planned strike on the home of a Gaza militant in Jabalya refugee camp after hundreds of Palestinians barricaded themselves inside the building.
In the occupied West Bank town of Jericho, Israeli troops shot dead a 17-year-old Palestinian after he approached them with a gun that later turned out to be fake, the army said.
An army spokesman said that after an initial inspection, troops found that the youth's gun was a metallic fake and that an investigation of the incident was under way.
A Palestinian source confirmed the killing and also said that the weapon was a fake. Witnesses said that the youth became angry after soldiers told him to stop talking on his mobile phone and that he pulled out the pistol before being shot.