The deaths occurred near the Al-Bureij refugee camp in Gaza where local radio earlier reported Israeli troops supported by tanks and armored vehicles had been involved in heavy fighting with Palestinian militants.
Earlier Friday local health authorities said two militants had died in Israeli air strikes on the southern Gaza Strip.
At least 13 Palestinians have died and 10 injured since Palestinian militants attacked a border fuel depot on Wednesday killing two Israeli civilians.
In a retaliatory measure, involving tanks and helicopters, Israeli troops killed at least seven Palestinians Wednesday.
Shortly after the Palestinian attack Prime Minister Ehud Olmert pledged to keep hitting Hamas so that it cannot "continue to operate against Israeli civilians as it does."
