Israeli tanks moved into the Mughazi refugee camp in central Gaza early on Wednesday under cover of machine gun fire from troops, the latest incursion in its three-week military push in the seaside territory.
Residents said 30 Israeli armoured vehicles were in the camp at sunrise. Soldiers took over several rooftops as bulldozers levelled farmland. The Israeli military confirmed that an operation was in progress.
Palestinians said two Hamas gunmen were killed and five wounded in clashes. Israeli aircraft fired two missiles at militants, they said.
Five Israeli soldiers were wounded, two seriously, the military said. They were evacuated by helicopter. Also, four children were slightly wounded when a tank shell hit a house in the camp, residents said.
The camp, with 22,000 residents, is near the Gaza-Israel fence and across from the Palestinian town of Deir al-Balah.
Israeli forces operated in the region late last week before withdrawing. Israeli troops have also swept through southern Gaza and carried out two invasions of northern Gaza, trying to stop militants from firing rockets at Israel.
The move into Mughazi was preceded by several hours of tank movements on the Israeli side, as well as exchanges of fire between soldiers and Palestinian gunmen.
Israel began a large-scale operation in Gaza on June 28, three days after Hamas-lined militants tunneled under the border and attacked an Israeli army base at a Gaza crossing, killing two soldiers and capturing a third.
On Tuesday, a team of United Nations envoys met with Palestinian President Mahmoud Abbas in Gaza City about the Israeli offensive in the territory.
"We hope the present crisis engulfing Gaza is to be overcome and we can come back to the situation where it is possible to pursue the objective of peace," UN envoy Alvaro De Soto said after the meeting.
Palestinian officials said the UN team brought no offers of a deal to end the fighting to Abbas, who called for an immediate cease-fire.
"The only issue that President Abbas focused on was to find a way to stop this Israeli escalation on the ground," Abbas spokesman Nabil Abu Rdeneh said. "This is the main topic, this is what we are looking for, apart from the humanitarian crisis which we suffer from."
In a statement early on Wednesday, the military said it opened two crossings into Gaza on Tuesday to allow shipments of food and fuel.
The statement said 145 food trucks entered Gaza through the Karni crossing, while 500,000 litres (132,000 gallons) of diesel fuel, 90,000 litres (24,000 gallons) of gasoline and 175 tons of cooking gas were sent through the Nahal Oz crossing.