US Secretary of State Condoleezza Rice has said Jewish homes in the Gaza Strip will be destroyed when Israel pulls out its troops and settlers.
Hundreds of homes will be pulled down to make way for Palestinians
Speaking after talks in Jerusalem with Israeli PM Ariel Sharon, Ms Rice said the move had been agreed by Israel and the Palestinians.
Earlier, Ms Rice said the pull-out would be an "historic" step which could lead to a Palestinian state.
In Gaza two have died, one Israeli, one Palestinian, in an army base attack.
The Israeli army said one Palestinian militant was killed after militants fired rocket-propelled grenades at Israeli soldiers and civilians on the border between the Gaza Strip and Egypt, and the army returned fire.
8,000 settlers to be withdrawn from Gaza
Four small West Bank settlements to be given up
Scheduled to start in mid-August and take eight weeks
Uprooted settlers to receive compensation
One Israeli soldier was also killed in the attack and two others were wounded.
Two Palestinian militant groups, including the Islamic Jihad movement, combined to launch the assault.
They said it was partly a response to Israeli army operations against Islamic Jihad leaders in the West Bank.
The Israelis say the Jihad activists there are continually plotting to carry out attacks despite the current tentative ceasefire between the two sides.
Ms Rice has called on the Palestinian leadership to take action to prevent the kind of attacks witnessed in Gaza.
She is now headed to Jordan for the next leg of her Middle East tour.
Ms Rice told reporters about 1,200 Jewish homes would be removed to make way for 1.3 million Palestinians living in the Gaza Strip, one of the most densely populated areas on Earth.
"The view is that there are better land uses for the Palestinians to better address their housing needs," adding that the parties would "work towards a plan for destruction and clean-up".
The fate of Jewish housing in the Gaza Strip following an Israeli withdrawal has been uncertain since Mr Sharon announced his plan in February 2004.
Last week, Israeli Defence Minister Shaul Mofaz warned that destroying the settlers' homes was unnecessary and could endanger the lives of soldiers.
Ms Rice also said Israel had agreed that Palestinian goods and people must be allowed to flow in and out of Gaza at a level that helps revive the economy.
Israel plans to withdraw about 8,500 Jewish settlers and the soldiers who guard them from Gaza and parts of the West Bank beginning in August.
Israel will continue to control Gaza's external borders, coastline and airspace.
Earlier, the secretary of state said the planned withdrawal from Gaza could boost the flagging peace process.
She said it was an "historic step that can lead to the eventual resolution and the eventual ability to get to a two-state solution", as envisaged under the internationally-backed roadmap plan for peace between Israel and the Palestinians.
The plan has been largely stalled since its launch in June 2003.
For his part, Mr Sharon said the US had an important role to play to ensure the pull-out - which he described as a very difficult step for Israel - goes smoothly.
The BBC's Barbara Plett in Jerusalem says Ms Rice wants Israel to work together on the withdrawal with the Palestinians, even though it made the decision to leave Gaza without consulting them.
Ms Rice, who met Palestinian leader Mahmoud Abbas on Saturday, will later travel to Saudi Arabia and Egypt after going to Jordan to discuss democratic reforms.