Israeli troops and tanks split the Gaza Strip and ringed its main city on Sunday in an offensive against Hamas that has killed 500 Palestinians, including a growing number of civilians.
Israeli tanks poured shells and machinegun-fire into suspected militant positions and war planes struck as Hamas fighters fought back with mortars and rockets.
Hamas kept up rocket attacks against southern Israel, defying efforts by the Middle East's most powerful army to achieve Israeli leaders' declared aim of removing the threat of cross-border salvoes.
"It's a very very interesting, demanding, tough first 24 hours right now, and we are committed to follow through to continue as long as needed to achieve our objectives," Israeli Defence Minister Ehud Barak said as he met Tony Blair, the envoy of powers sponsoring Middle East peace talks.
European Union foreign policy chiefs launched a mission to seek a ceasefire in the Hamas-run Gaza Strip but acknowledged they faced a difficult task.
At least 42 Palestinians, most of them civilians, were killed on Sunday as Israeli shells slammed into houses and Gaza's main shopping district, medical sources said.
Israel has accused Hamas of using civilians in the Gaza Strip as "human shields", saying the Islamist group has been firing rockets at Israeli towns from densely populated areas and storing weapons in homes and mosques.
Among the Palestinian casualties were five civilians killed and 40 wounded when tank shells slammed into Gaza City's main shopping area. Two children were dismembered by another blast from a tank, medical workers said.
A foreign Red Crescent doctor said: "Civilians are being killed ... shells are severing people's legs, shrapnel is going into people's bodies and into people's homes, a lot of people are being cut down. Everyone is terrified."
The head of emergency services in the Gaza Strip told Al Jazeera television that three Palestinian rescue workers were killed by Israeli fire on Sunday, raising to seven the total number of medical staff who have died in nine days of bloodshed.
The Saturday night invasion of the Hamas-ruled Gaza Strip followed a week of Israeli bombardments from land, sea and air -- the most serious Israeli-Palestinian fighting in decades.
The total Palestinian death toll tallied by Gaza medical officials in Israel's "Operation Cast Lead" rose to 512. A UN agency said at least a quarter of the dead were civilians. A Palestinian human rights group put the figure at 40 per cent.
One Israeli soldier was killed and 32 were wounded in the ground offensive, Israel said. Four Israelis have been killed by the Hamas rocket strikes since Dec. 27.
Israeli officials said the operation could last many days.
Witnesses said the Israeli thrust cut the territory in half from the border fence to the Mediterranean. Troops and armour had taken up positions around Gaza City itself.
Calls for a ceasefire from the United States, Israel's main backer, other governments and the United Nations failed to gain traction over disagreements about who should stop firing first.
Sunday morning saw gun battles between Hamas fighters and Israeli soldiers but later the action was mostly Israeli tank shelling and Hamas rocket and mortar-fire.
"The Zionist enemy must know his battle in Gaza is a losing one," Abu Ubaida, a spokesman for Hamas's armed wing, said.
An Israeli officer in Jerusalem said: "I would say that most of the resistances that we faced were from mortar shells and other things but not from serious Hamas fighters face-to-face."
The Israeli military said aircraft attacked dozens of targets, including smuggling tunnels, weapons caches and mortar squads. Dozens of Hamas fighters were hit, it added without being more specific.
Heavy civilian casualties in the territory packed with 1.5 million people could increase international pressure on Israel to halt its biggest operation in Gaza in four decades.
But the fighting also holds political risks for Israeli leaders before a Feb. 10 election, especially if its forces take heavy casualties in street fighting.
In southern Israeli towns, schools and malls remained closed and many streets were eerily empty.
The plight of Gaza residents was desperate. People have taken shelter in their homes for days and humanitarian agencies said water, food and medical supplies were running short.
Israeli government officials said Israel had set several goals, including weakening Hamas by killing its fighters and destroying its rocket arsenal and establishing deterrence so the group would think twice before firing cross-border salvoes.
In addition, the officials said, Israel hoped to win international backing for new security arrangements along the Egyptian-Gaza border to prevent Hamas from rearming through tunnels, which have been bombed in the current campaign.
In the occupied West Bank, the Executive Committee of the Palestine Liberation Organisation called on Palestinians to confront what it called the "criminal slaughter" in Gaza and reiterated that peace talks with Israel could not continue as long as the assault went on.
Iranian-backed Hamas is estimated to have about 25,000 fighters. Israel has not disclosed how many troops are involved in the operation but thousands of reservists were on stand-by.
The United States said a ceasefire should take place as soon as possible but must guarantee an end to Hamas rocket strikes. French President Nicolas Sarkozy, whose country's proposal for a 48-hour humanitarian truce was rejected by Israel last week, is due in Jerusalem on Monday.
Hamas called off a six-month truce last month and stepped up its rocket attacks, citing Israeli raids and a continuing blockade of the enclave Israel quit in 2005.
International peace efforts aimed at creating an independent Palestinian state foundered after Hamas won elections in 2006 and drove Fatah forces loyal to Palestinian President Mahmoud Abbas from Gaza a year later.
(Writing by Angus MacSwan; Editing by Sami Aboudi)