An F-16 jet demolished the Gaza City house with senior leaders from the ruling party’s military wing believed to be in it at the time of the strike. The Ezzedine al Qassam Brigades said that in response it would target Israeli civilians.
"Our reaction to this massacre will be painful and strong for the Zionists and we will make the enemy leadership sorry for their crime," the Brigades said in a statement.
"This new crime is a changing point in the rules of the battle. We will choose the rules of the game in the coming period. Our message to the Zionists is that your leaders are leading you to violence from which no one will be safe and when they target civilians they decided for you to be the target of our resistance," the statement added.
Six people died and around 30 people were wounded in the attack. But an al Qassam’s spokesman denied the group’s supreme military leader Mohammed Deif was wounded in the strike, as claimed by an Israeli military spokesman and a Palestinian medic.
Incursion
The air strike was preceded by a large- scale incursion into the central Gaza Strip, east of the Deir al-Balah refugee camp.
Israeli Prime Minister Ehud Olmert has flatly refused to negotiate with Hamas or free Palestinian prisoners in exchange for 19-year-old Corporal Gilad Shalit kidnapped by Palestinian militants. Mr Olmert vowing the assault will continue "in places, in time, in measures" at Israel's convenience.
Despite international criticism that Israeli force has been disproportionate, Mr Olmert has defended the scale of the operation.
An armed militant of the Popular Resistance Committees, which together with the military wing of Hamas and a third shadowy group claimed the June 25 capture of an Israeli soldier has been shot dead in clashes in the area, medics said.
Meanwhile, a column of tanks escorted by bulldozers entered 700 metres into the south of the Gaza Strip taking up positions around the village of El Karara.
With Israel's punishing aerial campaign now in a third week, at least 60 Palestinians have been killed in the operation, on top of one Israeli soldier killed by friendly fire.
Defence sources said that the government had given the military authority to continue, and if necessary, intensify the offensive, with infantry and armour poised to carry out "in-depth" incursions.
Palestinians in northern Gaza on Tuesday fired a homemade rocket against Israel, causing no casualties or damage.
In a statement issued after his weekly cabinet meeting, Palestinian Prime Minister Ismail Haniya warned against a "humanitarian tragedy" developing in Gaza as a result of Israel's continuing "blockade".
Aid groups have also expressed concern about the difficulties of providing assistance to one point four million people living in Gaza.
Hoping to calm the tensions, visiting Japanese Prime Minister Junichiro Koizumi is due Wednesday to hold talks with Mr Olmert before meeting Palestinian president Mahmud Abbas on Thursday.