Israeli forces raided the Gaza town of Khan Younis early today.
The raid comes after Prime Minister Ariel Sharon said he would amend his plan to withdraw from Gaza following a stinging defeat in a party referendum.
Helicopters, backing tanks that entered Khan Younis shortly after midnight, launched a missile at gunmen firing at Israeli forces. One gunman and a 15-year-old bystander were killed and others wounded, medics said.
The army said the operation was directed against militants operating in the area following Sunday's killing of a pregnant Jewish settler and her four children. The army said Palestinian gunmen had shot the children dead at point-blank range.
The raid came hours after Mr Sharon said he would make alterations to a plan to withdraw from the Gaza Strip and then present it to parliament for approval, despite losing a referendum on the initiative by his right-wing Likud party.
"If anyone thinks for a moment that these results mean deadlock, sitting around and waiting for what will come next, they are wrong," said Mr Sharon, a 76-year-old former general and godfather of the settlement movement before a recent about-face.
His allies said that while the referendum result was a humiliating reverse, he would not retreat since his landmark plan for "disengagement" from conflict with Palestinians enjoyed the support of most Israelis.
He is also keen not to alienate Washington, which reversed decades of policy and incurred Arab anger by assuring Israel it would not have to cede the whole West Bank under any peace deal, if it unilaterally vacated Gaza.
Mr Sharon did not say what changes he had in mind. But Likud sources said one way of rallying the party behind him might be to vacate only those Gaza enclaves "most exposed" to violence.