Four Palestinians, all members of Mr Yasser Arafat's security forces, were killed in Gaza during a nine-hour gun-battle yesterday.
The battle came as the Israeli Knesset began approving new legislation to enable Mr Benjamin Netanyahu - the former prime minister who promises to take a tougher stance in dealings with the Palestinians - to run again for the premiership.
In what marks yet another worsening of a vicious conflict, leaders of the Fatah militia, nominally loyal to Mr Arafat, are calling openly for an escalation of the Intifada, with all Jewish settlers and soldiers deployed in the West Bank and Gaza described as legitimate targets.
Israel, for its part, is publicly admitting that its forces have been given orders to seek out and kill alleged Palestinian gunmen.
This "assassination policy", Palestinian officials said, claimed another victim yesterday in Hebron, where Israeli troops killed a Hamas Islamic activist, Mr Abbas al-Awewi, who had served 14 years in Israeli jails and had been held in the past by the Palestinian Authority. The Israeli military said Mr al-Awewi had probably been caught in the crossfire of one of the intermittent shooting matches in the town.
The fighting in Gaza, on the outskirts of the Khan Younis refugee camp, was among the fiercest in the 2 1/2 months of conflict. It centred on a sand barrier - erected, the Palestinians say, to protect the camp; erected, the Israelis say, to shelter Palestinian gunmen who have been firing at both settlers and soldiers nearby.
During the battle, the Israelis used tank and rocket fire, and one of the Palestinians died when a rocket hit a police checkpoint. Apart from the four fatalities, the Palestinians reported more than 40 people injured.
Elsewhere in Gaza, Palestinian gunmen fired on a school bus near the settlement of Morag. The bus had been bullet-proofed, however, and none of the children was injured.
In the Israeli parliament, meanwhile, deputies passed the preliminary reading of what is being called "the Netanyahu law". This bill has been designed to enable Mr Netanyahu to run against the current Prime Minister, Mr Ehud Barak, in elections for the premiership, even though he is not currently a member of parliament.
It seems likely that this law may be finally approved next week - or that the Knesset will opt instead for full general elections.
Mr Barak is still hoping that the violence will ebb, peace talks will resume, and he will secure re-election via a new accord with the Palestinians. But Mr Arafat indicated no desire for such a deal in talks in Morocco with the US peace envoy, Mr Dennis Ross.
The commission of inquiry into the violence led by Senator George Mitchell completed a three-day visit to the region yesterday.