The target of the attack was not immediately known, but Israel has been waging war on the Islamic militant group Hamas in retaliation for a deadly suicide bombing that killed 21 people on a Jerusalem bus Aug. 19. Fourteen Palestinians, including at least 10 Hamas members, have now been killed in missile strikes.
In Monday's attack, the missiles hit a small car as it was driving in a crowded side street in downtown Gaza City.
Witness Salman Abu Nour, 42, said he was working in his print shop when the missiles hit. "I rushed outside, and saw a car like a ball of fire. I brought my fire extinguisher and helped people to fight the fire," he said.
The missile strike came as army chief Lt. Gen. Moshe Yaalon was quoted as telling Cabinet that Israel is prepared to send an infantry brigade into the Gaza Strip to stop Hamas rocket fire.
Troops also critically wounded a 15-year-old Palestinian in a clash with stone-throwing youngsters Monday, as more than 1 million Palestinian youngsters in the West Bank and Gaza returned to classes. The Israeli military eased restrictions in some of the reoccupied West Bank towns to allow students to get to school.
In the city of Nablus, hundreds of students threw stones at tanks and jeeps in several locations. Troops fired tear gas, rubber bullets and also live rounds to disperse the crowds, witnesses said.
In one incident, a Palestinian threw a firebomb at a tank near the main square, where about 70 stone throwers were assembled. The top of the tank caught fire, said Palestinian rescue worker Ala Aratrut, who witnessed the incident. "A soldier from inside the tank began shooting randomly. The top of the tank was going round while the shooting went on," Aratrut said.
A teenage boy fell to the ground after being shot in the head, the rescue worker said. Doctors said the 15-year-old boy was in critical condition.
The Israeli military had no immediate comment.
Israel's Cabinet convened Monday, and Israeli Prime Minister Ariel Sharon told ministers that there will be no letup in the campaign against Hamas and other militant groups.
"We are continuing our operations against Hamas and other terror groups to prevent them from harming Israel's citizens," he said.
Yaalon was quoted by various Israeli media as telling the Cabinet that he is prepared to send an infantry brigade into Gaza, if necessary, to stop Hamas rocket fire. A brigade would consist of about 3,000 soldiers, including fighters and support personnel.
In the past three years of fighting, Israel has carried out several ground offensives in Gaza, but has shied away from reoccupying large areas of the densely populated coastal strip, instead focusing on air strikes. However, Israeli Defense Minister Shaul Mofaz said Sunday he was ready to order a ground offensive if rocket fire does not cease.
In the past two years, Hamas has fired dozens of rockets at Israeli settlements in Gaza and at border towns in Israel, causing only minor damage and injuries. However, Israel considers the rockets a strategic threat, particularly last week's hit in the industrial zone of Ashkelon. Sharon has said he believes Hamas is trying to hit a large power station near Ashkelon.
The Israeli military said Monday it is planning to build 40 to 50 bunker-type rooms for Gaza settlers, to protect them from rockets and mortars.
In the Palestinian areas, meanwhile, a power struggle between Palestinian leader Yasser Arafat and his beleaguered prime minister, Mahmoud Abbas, is intensifying, with clashes over key appointments and control of security forces.
Several Palestinian legislators, including Arafat allies, are lobbying to oust Abbas later this week after he presents a report on his first 100 days in office to parliament. It remains unclear whether the session will be followed by a vote of confidence.
Israeli Foreign Minister Silvan Shalom suggested on Sunday that an already troubled U.S.-backed peace plan would be derailed if Abbas is ousted.
"Israel will not negotiate with a new government formed under the instructions and the influence of Arafat," Shalom said.
Arafat reluctantly appointed Abbas as the Palestinians' first prime minister in April under pressure from Israel and the United States, which have accused Arafat of blocking peace efforts.
Parliament Speaker Ahmed Qureia, considered a possible replacement for Abbas, said Sunday that the infighting is harming Palestinian interests. He said the external interference "is complicating the crisis," but did not specify who he was referring to.
Abbas has minimal support among Palestinians, many of whom say they distrust him because he has Israel's backing. And while Arafat also has lost popularity after failing to deliver on promises of statehood, the 74-year-old remains the symbol of dreams of independence.
Written by IBRAHIM BARZAK