Hamas fighters on Thursday raised the green flags of the Islamist movement over one of the last Gaza City bastions of forces loyal to Western-backed Palestinian President Mahmoud Abbas, witnesses said.
Some of the defenders fled the heavily fortified Preventive Security headquarters while others surrendered, promised "safe passage home" in an announcement on Hamas radio.
Gunfire still sounded from nearby rooftops where other Fatah men were shooting at Hamas attackers, witnesses said. Medical workers said at least 10 people were wounded in the battle.
Fatah denied the headquarters had fallen, but green Hamas flags fluttered from its rooftop -- a powerful symbol to Gazans that Hamas had largely taken charge after five days of bloodshed in the territory in which more than 80 people have been killed.
"It's a war zone. Since yesterday we have been living the most horrible time of our life," one neighbor, Sadi, said by telephone as he tried to calm his weeping children.
Hamas's seizure of the compound would deal a heavy blow to forces loyal to Abbas, whose aides said he was preparing a major announcement.
He may well dissolve the Hamas-led "unity" government, a move that could entrench a division of Palestinian territories into two.
Hamas's armed wing has made major gains in the offensive that began on Saturday, raising the prospect of an aggressive Islamist statelet of 1.5 million people on Israel's borders, beyond what Western powers have seen as the moderating influence of Abbas.
"Gaza is lost," one senior Abbas aide has told diplomats.
The violence, in which children and other civilians also have been killed, has been the bloodiest between the factions since Hamas used its Gaza power base to win a parliamentary election early last year.
A Fatah official at Abbas's headquarters in Ramallah in the more peaceful West Bank said Abbas would issue an announcement later in the day on the future of the unity government that his movement formed with Hamas in March in a bid to end factional violence and ease Western sanctions.
"The intention is to fire the government," another Fatah official said.
Fatah threatened on Tuesday to quit the coalition, a move that could let Abbas rule by decree; although the surge in bloodshed has shown his authority does not extend far in Gaza.
Residents said Hamas forces appeared to be in control of considerable areas of the crowded territory and were surrounding Fatah forces in several other bases.
Faced with the prospect of a Hamas-run Gaza Strip, Israeli Prime Minister Ehud Olmert has said an international force along the territory's border with Egypt should be considered.
Hamas, which along with other groups smuggles weapons into Gaza in tunnels built under the frontier, rejected the idea.
"The movement would regard those forces as occupation forces no different to the Israeli occupation, regardless of their nationality," Hamas official Sami Abu Zuhri said.
The European Union's foreign policy chief said on Wednesday the EU would consider participation in an international force
At the United Nations, U.N. Secretary-General Ban Ki-moon also raised the possibility of "an international presence" during a lunch with U.N. Security Council members.
He said Abbas had asked him to consider UN involvement during a telephone call on Tuesday.
Hamas officials said Prime Minister Ismail Haniyeh was demanding Abbas hand him full control of Palestinian security forces under the terms of an agreement forged with Arab mediation at Mecca which led Fatah joining the cabinet in March.
Abbas, officials said, has insisted that Hamas must stop fighting before he will negotiate.