It was unclear how many of the dead were fighters. CBS News Correspondent Robert Berger reports the army said a helicopter fired a missile killing five armed Islamic militants. Palestinians say two civilians were among the dead, including a woman. Israel said it was targeting militants responsible for deadly attacks.
Men called through mosque loudspeakers for people to come out and battle the Israeli soldiers, who entered the Bureij Camp just after midnight. Fighters poured into the dark streets, and gunbattles raged for three hours.
Ahmed Rabah, a doctor at the Al-Aqsa hospital in the nearby village of Deir el Balah, said nine people were killed and 11 were wounded. Rabah did not identify the casualties. An official at Shifa Hospital in Gaza City said a tenth person, a woman, died of injuries.
Hassan Safi, 49, said he was in his home when an explosion about 300 yards away rocked the neighborhood. He said he thought the blast was from a tank shell.
"I rushed with my sons to the place, which was all destroyed. I myself took out two people. The helicopter was firing with machine guns at us, making it difficult to move," Safi said.
During the incursion, witnesses said troops surrounded the home of Jamal Ismail, a suicide bomber who blew himself up along with another man in an explosive-packed boat off the Gaza coast last month, wounding four Israeli soldiers in a nearby navy patrol.
The Israeli army called the camp "a base for hardcore terror groups" of the militant Hamas, Islamic Jihad and Popular Resistance Committee.
Brig. Gen. Israel Ziv said the operation targeted Aiman Shasniyeh, a local leader for the Popular Resistance Committee, who the military believes was behind a bomb attack on a Merkava-3 tank that killed three soldiers in March.
Troops failed to find Shasniyeh but used explosive charges to destroy his house. Soldiers arrested one of his brothers, along with another man wanted by Israeli intelligence, Ziv said.
Troops approaching Shasniyeh's house came under withering gunfire from nearby homes and on the street in what turned into a close-quarters gun battle in the camp's narrow alleyways, said army spokeswoman Capt. Sharon Feingold. One soldier was lightly wounded by gunfire, she said.
Helicopters fired machine guns from above.
Palestinian leader Yasser Arafat said he was outraged by the attack.
"Every day there is a new massacre," he told reporters outside of his office in the West Bank city of Ramallah. "Every day there is destruction. Every day there is more damage. Every day there are more arrests and every day there are more assassinations."
An aide to Arafat, Nabil Abu Rdeneh, said the Palestinians would call on the United Nations Security Council to hold a special session on the violence and to consider sending international observers to the region.
A White House document obtained by The Associated Press on Thursday in effect blames the Palestinians for the Mideast violence now moving into a third year. It charges that Arafat's Palestinian Authority and the PLO have not taken steps to stop militants.
Still, President Bush has decided not to impose sanctions, which could include closing the Palestine Liberation Organization office in Washington. A memorandum that prefaces the 12-page report, dated Nov. 29 and signed by Mr. Bush, waives sanctions, saying they would be against U.S. security interests and that the United States "must maintain contacts with all sides."
The memorandum was made public in Washington on Monday, but the remainder of the report was not. It was obtained by the AP in Jerusalem.
Palestinian Cabinet Minister Saeb Erekat told the AP that he had seen excerpts of the document. He called it "unfair and unacceptable."
The Palestinians blame the violence on Israel's military crackdown and its failure to adhere to a timetable for giving up land under the 1993 Oslo accords. They also say Israeli military operations in the West Bank and Gaza Strip have decimated the Palestinian security forces and left them unable to stop militants.
Though the Palestinians have not rescinded their recognition of Israel, the report claims that their "failure to take action against terror groups … has called into question their commitment of recognizing Israel's right to exist in peace and security."
Arafat has condemned suicide bomb attacks and other violence against Israeli civilians. However, echoing Israeli complaints, the U.S. report notes that Palestinian leaders "failed consistently to condemn attacks on Israeli settlers and soldiers in the occupied territories."
Many Palestinians consider settlers to be combatants, like Israeli soldiers, since they occupy land the Palestinians claim for their own state.
The report is produced twice a year by the White House and transferred to the State Department. The department then submits it Congress under terms of maintaining the PLO office in Washington.