Israeli forces also battled with about 800 settlers before tearing down the single permanent structure in the illegal northern West Bank outpost of Mitzpe Yitzhar, an outpost that has been dismantled and rebuilt several times in the past. Several settlers were arrested. At least one police commander and possibly some settlers were injured. An Arab house in a nearby village caught fire.
Israel wants to widen a military patrol road between Rafah and the Egyptian border after Palestinians blew up an armored vehicle there last week, killing five soldiers assigned to destroy arms-smuggling tunnels.
Broadening the Israeli buffer zone would mean bulldozing rows of houses in Rafah and making many more Palestinian refugees, who fled homes during the 1948 Mideast war over Israel's creation, homeless again.
Frantic residents loaded belongings onto trucks and donkey carts and headed to the neighboring town, also named Rafah. The U.N. Relief and Works Agency, which helps refugees, set up emergency shelters in schools and pitched a tent camp.
UNWRA estimated it would cost $32 million to re-house the more than 18,000 people who have lost their homes throughout the Gaza Strip.
Women balanced mattresses on their heads, children carried blankets and door frames, and men carted sofas away from the camp. One man lowered a cooking gas container by rope from a second floor, and another piled fire wood onto a horse cart.
Raouf Abu Jazar, 37, said dozens of people crowded his grocery store, stocking up on rice, bottled water and baby food. "Many had no money to pay, but I gave them what they want, because we all are brothers," he said.
Last week, Israeli troops destroyed about 100 houses in the camp, and officials said hundreds more may be torn down. In all, more than 11,000 Palestinians in Rafah — out of a population of 90,000 — have been made homeless by Israeli demolitions since the outbreak of fighting in 2000.
United Nations Secretary-General Kofi Annan urged Israel on Monday to stop bulldozing homes in Rafah, saying the demolitions violate international law and inhibit U.N. refugee workers from doing their jobs.
"I am really distressed that the destruction of houses continues," he said.
"Israel is in grave breach of international humanitarian law," said UNWRA Commissioner-General Peter Hansen. "This collective punishment can do nothing to calm the situation in Gaza or enhance Israel's own security."
The Jerusalem Post reports Israel and Egypt are discussing altering several clauses in the Camp David accords that would allow Egypt to station additional forces close to the Gaza border to fight arms smuggling into Rafah.
Under the terms of the treaty, the Egyptians can only introduce a limited number of lightly armed forces near the border.
Israeli security officials said they plan to expand the patrol road to a width of 250 yards, almost double its current size in some places. The army is also considering digging a deep trench, or even a moat, to block the tunnels that lead from Egypt to Rafah.
The Israeli patrol road was carved out in the 1980s, after Israel and Egypt signed a peace treaty in 1979 and Israel withdrew from the Sinai Peninsula, to its international border with Egypt.
That border went through the camp, and thousands of houses were destroyed on both sides to create the Israeli-controlled zone, with compensation paid to those being displaced.
However, Yuval Dvir, an Israeli reserve colonel who oversaw that destruction, said Israel must leave Gaza now, and that the plan to widen the road was "foolish" and would not enhance Israeli security. "We are following our guts and not our brains," he told Israel Army Radio.
Deputy Defense Minister Zeev Boim said civilian hardships are unintentional but unavoidable. Some of the people in Rafah "rent their houses for digging tunnels, so not all of the people there are blameless."
A senior Israeli military official charged that high-ranking Palestinian security officers are involved in arms smuggling.
Palestinian security officials were not immediately available for comment.
After Secretary of State Colin Powell denounced the destruction of houses Sunday, in a rare criticism of Israeli policy, Palestinians appealed to the United States.
Palestinian Foreign Minister Nabil Shaath pleaded with U.S. National Security Adviser Condoleezza Rice during a meeting in Berlin on Monday to stop the Israeli offensive. Shaath told Rice he has received calls from fearful relatives in Rafah.
"She (Rice) said that she and President Bush will act to stop what is going on in Rafah," Shaath said.
Palestinian legislator Mohammed Hijazi, an area resident, said hundreds of families have left the camp since Sunday, and local officials put the number of evacuees at more than 2,000.
Since the outbreak of Israeli-Palestinian fighting in 2000, Israel has demolished or damaged nearly 2,000 houses in Rafah, making more than 11,000 people homeless, according to UNRWA.
Amr Moussa, the secretary-general of the Arab League, condemned the destruction and charged that Israel's leaders are destroying chances for peace. "Who would sit down with these people," he said.