Three Israeli soldiers and two Palestinian gunmen are dead after a shoot-out in the Gaza Strip. Palestinians are evacuating their security headquarters in anticipation of an Israeli strike.
The fierce gun battle broke out in the early morning hours at an Israeli military base in the Southern Gaza Strip.
The Israeli army says Palestinian militants infiltrated the post, opening fire with automatic rifles and hand grenades. The army statement says the Palestinian gunmen were killed, as were three Israeli soldiers, including a major.
The fighting erupted at the Marganit military base which guards the Jewish settlement of Gush Katif in the Gaza Strip. It is the largest settlement in the Strip and has been a flash point in nearly a year of Israeli-Palestinian violence.
The military wing of the Democratic Front for the Liberation of Palestine reportedly claimed responsibility for the attack. In a statement, the group says it was in response to Israeli assaults on Palestinians.
Anticipating an Israeli retaliatory strike, Palestinians are evacuating security buildings in Gaza. Palestinian witnesses say they have seen Israeli helicopters flying over the area, and a coastal road in Southern Gaza has been blockaded.
In the past, Israel has hit Palestinian Authority buildings after attacks on Israeli targets. Speaking on Israel Television on Friday, Israel's defense minister said that Israel would not "sit quietly" without responding to Palestinian attacks.
There has also been fresh fighting in the West Bank city of Hebron, one day after Israel briefly entered the Palestinian-controlled area of the city.
Friday's incursion followed the shooting of two Israeli settlers, one an 11-year-old boy.
Israeli and Palestinian youngsters have frequently been caught in the cycle of violence which began nearly one year ago.
On Friday, several Palestinian children and teenagers were injured, some of them critically, after Israeli soldiers opened fire on youths throwing stones at them.
Since the Palestinian Intifada, or uprising, began last September, more than 700 people have been killed, most of them Palestinians.