Two women have been killed as Israeli troops opened fire on a crowd of women gathered to help besieged gunmen flee a mosque in Beit Hanoun in northern Gaza.
One of the women told the BBC they had dressed the militants in women's clothes to help them escape.
The Israeli military said the women were used as "human shields" and that there had been armed men in the crowd.
Reports said at least 16 Palestinians were killed on Friday, the third day of a major Israeli raid on Beit Hanoun.
Several of the dead were killed during a series of air strikes which took place after dark on sites across Gaza.
At least one Palestinian died at a building used as a mosque in Beit Hanoun, another was killed close to nearby Beit Lahiya; two more were killed in the Jabaliya refugee camp, also in northern Gaza.
In Rafah in southern Gaza, a member of a security force linked to Hamas was killed and three wounded when their vehicle was hit in an air strike.
An Israeli military spokesman said five air strikes had taken place, targeting suspected militants who were planting explosives or involved in rocket attacks on Israel.
In the dramatic mosque rescue, Hamas radio issued an appeal to local women when a tense stand-off developed between Israeli forces surrounding the building and up to 15 militants who had taken refuge inside.
One of the women, Nahed Abou Harbiya, described what happened to the BBC Arabic Service.
"All the women headed to the mosque to get the Palestinian resistance men... But the Israeli occupation forces were firing heavily at us with their machine guns and also threw stun grenades at us.
"We entered the mosque and indeed we got all the resistance men out and put female attire on them so that the Israeli occupation forces wouldn't arrest them," she said.
Israeli troops had moved in and sealed the town off on Wednesday, in one of the biggest offensives in recent months, which Israel says is aimed at stopping militants firing rockets into Israel.
Shots were fired as the women approached Israeli forces. As some of the women tried to pass the troops, further shots came and two women fell to the ground.
At least 10 women and a Palestinian cameraman were injured.
"We risked our lives to free our sons," Um Mohammed, a woman in her 40s, told the AFP news agency afterwards.
Hamas radio reported that all of the militants in the mosque escaped and were uninjured.
Israeli military spokeswoman Avital Leibovich said: "Unfortunately, maybe one woman was killed - I don't know if it's by IDF or not. But our purpose is definitely not to hit the innocent ones.
"We saw crowds of women. Behind the women hid some of the militants. Some of them were even dressed up as women: we have footage," she said.
"Unfortunately because the militants shot at our forces, sometimes we had to respond."
The BBC's Matthew Price in Jerusalem says that in television footage of the incident, some men are visible in the crowd, but there is no evidence that they were carrying guns.
Palestinian Prime Minister Ismail Haniya, of Hamas, said the event was part of a "planned annihilation" of the Palestinians.
He called on UN Secretary General Kofi Annan to come to see what he described as "massacres" committed against them.
In other developments:
- An Israeli air strike on Gaza City killed four Hamas militants, with a local commander of Hamas' military wing reportedly among the casualties
- The Palestinian housing minister was arrested by Israeli troops in the West Bank town of Ramallah
- An elderly Palestinian woman was killed in the West Bank town of Bethlehem during an Israeli army arrest raid
- At least one Palestinian youth died during an Israeli operation in the West bank town of Nablus
About 30 Palestinians and an Israeli soldier have died in violence since the Israeli operation in Beit Hanoun began on Wednesday. Many of those killed were gunmen, but a four-year-old boy died from his wounds overnight.
BBC Middle East analyst Roger Hardy says that Israel's most immediate aim is to prevent rocket attacks against its territory, but beyond that it wants to strike a decisive blow at Hamas.
Israeli forces have made regular incursions into Gaza and the West Bank following the capture of an Israeli soldier, Cpl Gilad Shalit, in a cross-border raid by Palestinian militants on 25 June.
More than 300 Palestinians have been killed in army operations since then, according to Israeli human rights group B'Tselem.