Israeli attack helicopters, warplanes and tanks hit a training camp in Gaza, used by the Islamic militant group Hamas. At least 14 militants were killed and around 30 people were injured.
The raid was launched shortly after midnight in the Gaza City neighborhood of Shajaya, known as a Hamas stronghold.
The Israeli military says it targeted a field used by Hamas to assemble bombs and suicide belts and to teach militants how to plant explosives and infiltrate Jewish settlements.
Hamas spokesman, Mushir al-Masri denounced the action, but acknowledged those killed were Hamas members. He would only say the Israelis struck what he termed a "summer camp" used by Hamas members and he warned the action would not go unpunished.
Gaza's main hospital was overwhelmed as Palestinians brought in the wounded, while others took bodies and body parts to the local morgue.
Israel's Deputy Prime Minister Ehud Olmert told Israel Radio the aim of the raid was clear and part of ongoing action against militant groups. Mr. Olmert said Israel will hit as many Hamas militants as possible, knowing that they are preparing to carry out attacks against Israel.
The strike comes just a week after two Hamas suicide bombers blew themselves up on two buses in the southern Israeli city of Beersheva, killing 16 people. Israel promised harsh reprisals for the attack, including a resumption of targeting militant leaders for assassination.
Hamas has vowed revenge for this latest Israeli strike against its members in Gaza. Thousands of people, including dozens of armed militants took part in the funeral procession for those killed and vowed reprisals. Palestinian militants also fired rockets and mortars into Israeli settlements in Gaza and into the Israeli town of Sderot, where one man was slightly injured in the attack.
Both sides talk of all out war - the Israelis say they're conducting a war against terrorism; Palestinian militants say theirs is a war against Israeli occupation. Hamas spokesman al-Masri said "one day for us and one day for them."
That statement is a chilling reminder of the seemingly endless cycle of attacks and reprisals by both sides that began four years ago with the outbreak of this intifada. Since then well over three thousand Palestinians and over one thousand Israelis have been killed.