Five Israeli soldiers were killed last night and five wounded when 1,500kg of explosives in a tunnel under a checkpoint on the Gaza-Egypt border was blown up by Palestinian militants.
As violence increased after the relative lull that followed Yasser Arafat's death, the attack, described as "well planned and co-ordinated" by the Israeli military, caused the collapse of buildings in the north-east section of the Israeli-controlled crossing at Rafah.
It is used by Palestinian civilians crossing into Egypt, but the explosion was detonated at 5.20pm, 50 minutes after it had closed for the day. The army said the crossing would be closed until further notice.
A military statement thise morning said two Palestinians opened fire after the blast, and soldiers shot them dead. A Palestinian who said he had escaped said he tried to kidnap a wounded soldier, but killed him because the soldier resisted.
Palestinian sources said the tunnel, for which the militant factions Hamas and a Fatah sub-group calling itself the Fatah Hawks claimed responsibility, started 800 metres away from the crossing. A second explosion an hour later apparently caused no injuries.
A Palestinian militant giving his name as Abu Majad said the overall attack was the work of Hamas and the Fatah Hawks and was retaliation for "the assassination" of Arafat, who died in a French hospital in November. Some Palestinians have claimed he was poisoned.
An Israel Defence Forces spokesman said last night that there had been an "alert" about a possible attack on the checkpoint in August and the crossing had been closed for three weeks.
As the explosion, which follows a series of mortar and Qassam rocket attacks aimed at Jewish settlements in Gaza, threatened the efforts by Mahmoud Abbas, the new Palestinian Liberation Organisation chairman, to secure a ceasefire, an Israeli military spokesman said the attack had been "another Hamas attempt to undermine every Palestinian peace attempt in that area".
Early this morning Israeli helicopter gunships fired six missiles at targets in Gaza City in apparent retaliation for the border attack. Hospitals had no immediate reports of casualties.
The latest bloodshed follows renewed deployments by the Israeli army west of Khan Yunis, the southern Gaza town, to prevent further mortar attacks on the Jewish settlement of Gush Katif. At least five Palestinian schoolchildren between eight and 12 were reported wounded by shrapnel from Israeli tank fire in Khan Yunis.