The Israeli military confirmed striking the Popular Resistance Committees camp in the southern Gaza town of Rafah, saying militants there were planning a large-scale attack on Israel.
It said "the camp was the target" when asked if Abu Samhadana, the No. 2 man on Israel's wanted list, had been the target. His body was incinerated but his face was recognisable, hospital officials said.
Three other people were killed and 10 were wounded by the four missiles fired at the training camp. The attack knocked out electricity in the area, hampering rescue efforts and attempts to ascertain casualties.
Militant leader
Abu Samhadana, leader of the small Popular Resistance Committees faction, was a key player in rocket attacks on Israel and a suspect in the fatal 2003 bombing of a US convoy in the Gaza Strip.
His recent appointment as director general of the Hamas-led Interior
Ministry infuriated both Israel and Hamas' Fatah rivals, led by
Palestinian President Mahmoud Abbas.
It also helped set the stage for recent Hamas-Fatah violence that has killed 10 people and raised the specter of all-out civil war.
"This is a criminal assasination and Palestinians have the right to respond to this ugly crime by all means," said Khaled Abu Hilal, an Interior Ministry spokesman. "Abu Samhadana paid with his life for the freedom and dignity of his people."
A spokesman for the Popular Resistance Committees vowed revenge. "The Zionists and Israelis have opened the gates of hell by assassinating Abu Samhadana," spokesman Abu Abir said.
Thousands of people from all Palestinian factions streamed to the mosque where his body was being taken.
Abu Samhadana, a 43-year-old explosives expert, had been a key target for Israel, moving stealthily and switching cars and hideouts, despite his promotion to security chief by the Hamas-led government.
Referendum
Meanwhile Mr Abbas is poised to call a controversial statehood referendum for July 31 despite staunch opposition from the Hamas-led government.
"Mr Abbas is to sign the decree setting the date for the referendum on Saturday, which means it will be held 50 days later," on July 31, Nabil Abu Rudeina said.
The announcement came as hopes had all but disappeared for a compromise between the moderate president of the Palestinian Authority and the radical Islamists who run its government.
The referendum, based on a document drawn up by senior Palestinian prisoners held by Israel, is designed to draw a line under rivalry between Hamas and Mr Abbas's Fatah faction which was thrashed in January's parliamentary election.
However Hamas has repeatedly stressed a desire for the factions to resolve their differences in negotiations rather than via a referendum, and accuses Mr Abbas of trying to topple its government.