Palestinian president Mahmud Abbas dubbed the strike, also in the Gaza Strip, an act of state terrorism.
The raid, the deadliest since the Islamists of Hamas won elections in January, turned the focus back on the conflict with Israel after a bout of factional violence, which saw the parliament and cabinet offices set ablaze.
Although two of the victims were confirmed as members of the hardline Islamic Jihad movement, the other nine were believed to be civilians. They included two young brothers, aged four and eight, and their father.
Meanwhile, the apparent volte-face by Israel over the beach explosion was refuted by a US human rights group and the United Nations.
Defence Minister Amir Peretz denied any Israeli responsibility in the deaths, which included seven members of one family.
"We have enough evidence that back our big suspicions that the attempt to present this as an Israeli incident is simply untrue," Mr Peretz said.
He was speaking at a press conference before the presentation of the results of an internal military inquiry into the deadly incident, which the Palestinians claim was caused by Israeli shelling.
Seven people, including three children and their parents, died on Friday in an explosion at the beach where they were picnicking. A man wounded in the blast died in hospital the following day.
General Meir Kalifi, who headed the committee, said the army had shelled areas north of the beach in a bid to stem Palestinian rocket fire against Israel, but that the deadly blast was not caused by a shell.
"We can say that all the shells hit their targets. We have details records of each and every shell," Mr Kalifi said.
Shelling “most likely” cause
But a military analyst from the New York-based Human Rights Watch said on Tuesday that the explosion was "most likely" the result of Israeli shelling.
"It is my contention that the most likely scenario is that Israeli shelling hit the area," Marc Garlasco, a former Pentagon advisor, told journalists in Gaza City.
And UN Secretary General Kofi Annan described as "odd" the suggestion by the Israeli investigation.
"To find a mine on the beach is rather odd," he told reporters at the UN headquarters.
According to the Israeli inquiry, the shrapnel removed from Palestinians wounded in the incident and treated in Israel did not match the material used in Israeli ammunition.
Photos and television images of the crater produced by the explosion resembled that of a bomb or a mine, Mr Kalifi said.
Mr Garlasco based his conclusions on an investigation of the site, interviews with and examinations of those wounded and shrapnel from the explosion.
"It has been suggested by some that the family was killed by a land mine, and this is patently not the case," he said.
"The injuries of the people in the hospital were all to the torso and head, so a land mine couldn't have done this."
Unexploded shell a possibility
Mr Garlasco did not rule out the possibility that an unexploded Israeli shell had been left on the beach or turned into makeshift bomb by militants.
He noted 40 unexploded shells have been turned over to the Palestinian bomb squad in northern Gaza. Still, he called the notion "way out there."
Ghazi Hamad, spokesman for the Hamas government, said earlier on Tuesday that Israel was trying to engineer a whitewash.
"Israel is shying away from its responsibilities over this atrocious crime, without offering the slightest proof," he said.
Gaza airstrike
In the air strike, around 42 other people, including six children, were wounded in the raid on the main north-south road in the narrow coastal territory.
A military spokesman confirmed the involvement of its aircraft in the first explosion.
He said they had hit a car carrying militants who were preparing to fire Katyusha-style rockets which have a much longer range than the usual makeshift missiles fired by the Palestinian factions.
A local leader of Jihad, Khaled al-Batsh, told AFP three of the movement's followers had been in the vehicle that was targeted.
Two of them were killed when two missiles slammed into the vehicle. The other casualties were caused by a third missile, which was fired a short time afterwards while a group of civilians had gathered at the scene.
Israel has intensified its air strikes in recent days against all factions, including the governing Hamas, which recently resumed rocket attacks following the beachfront deaths.
Mr Abbas denounced the latest civilian deaths. "What Israel is doing is called state terrorism," he told reporters at his office in Gaza. "This state terrorism will not shake us."