Hamas threatened revenge after an Israeli helicopter blew up a car on a busy Gaza City street, killing a Hamas militant who was involved in making and firing rockets at Israeli towns.
Six bystanders were wounded, two of them seriously, hospital officials said.
The missile struck Khaled Abu Shamiyeh, 30, as he was riding in his car in Gaza City.
Abu Shamiyeh was the head of Hamas in Gaza's Sheik Radwan neighborhood, and was involved in building homemade Qassam rockets, the army said.
Omar Arfa, 52, who owns a fast food stand in Gaza City, said the street was full of cars when the helicopter fired the missile.
"A spark came from the sky, then there was a huge explosion in part of street," he said.
Hamas militants gathered at the hospital and called for revenge against Israel.
"Hamas will teach the enemy [Israel] a painful lesson," said Hamas spokesman Mushir al-Masri.
Israel has killed dozens of Palestinian militants and scores of bystanders in targeted attacks in four years of fighting. On Sept. 7, helicopters fired missiles at a Hamas training area, killing 14 militants. Hamas has carried out dozens of suicide bombings in Israel.
In a separate incident in Gaza yesterday, the Israeli army killed an unarmed Palestinian who was approaching a military outpost near a Jewish settlement, the army said.
Prime Minister Ariel Sharon pledged on Sunday at his weekly Cabinet meeting to strike back at militants launching rockets from the Gaza Strip, saying the army would fire at them even if they are in residential areas.
"We have to think about how to act against the sources of the fire, after warning the civilians," Sharon was quoted as saying by Cabinet ministers in the meeting.
Hard-liners who oppose Sharon's "disengagement" plan to withdraw from all Gaza Strip and four West Bank settlements say that a Gaza pullout would put more Israeli cities within range of Palestinian rockets.
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