Israeli tanks moved into Gaza City early Friday and destroyed a police post and two other buildings, the first operation there since a bombing attack killed a Hamas leader and 14 other Palestinians in a mission that drew harsh world criticism.

Witnesses said seven tanks accompanied a bulldozer that flattened a small Palestinian military intelligence position and a metal workshop, and then soldiers blew up another workshop in a blast that could be heard all over the city.

Gunmen fired at the Israelis, and two Palestinians were wounded in the exchange, they said.

The Israeli military refused to comment. In the past, the Israeli military has destroyed metal workshops in Gaza, explaining that Palestinians were making mortars, rockets and shells.

Late Thursday, a rocket hit an Israeli village just outside Gaza, causing some damage but no casualties, the military said. In the past, the Israeli military has destroyed metal workshops in Gaza, explaining that Palestinians were making mortars, rockets and shells.

The move into Gaza City came hours after Palestinian gunmen killed a rabbi and wounded another Israeli in a roadside ambush near a Jewish settlement on Thursday.

Despite the violence, tentative efforts were underway to restart talks among Palestinian factions toward stopping attacks against Israel. Palestinians said the Israeli bombing sabotaged plans for a unilateral truce declaration by one or more Palestinian groups.

Israeli officials continued to justify the air strike Tuesday that killed Hamas commander Salah Shehadeh, while apologizing for the civilian casualties. But international denunciations continued.

Calling the Israeli attack "abominable," Egyptian President Hosni Mubarak charged that Israel's goal was to sabotage cease-fire efforts. Mubarak was speaking in Paris.

In Washington, Secretary of State Colin Powell said the Bush administration is reviewing Israel's use of U.S.-made weapons in the wake of the air strike. Israel had no comment, but an official, speaking on condition of anonymity, said Israel was receiving no special treatment and had nothing to hide.

Israeli Defense Minister Binyamin Ben-Eliezer said Thursday that Israel called off strikes against Shehadeh several times after learning that civilians were with him.

Last Saturday night, "the plane was in the air" with the bomb when Israel discovered that one of Shehadeh's seven daughters was with him, and the strike was called off, Ben-Eliezer said.

However, Shehadeh's 14-year-old daughter Iman was killed in Tuesday's strike, along with Shehadeh, his wife, a bodyguard and 11 other people, most of them children in adjoining buildings.

Addressing the Labor Party that he leads, Ben-Eliezer defended the decision to kill Shehadeh, commander of the Hamas military wing known as Izzadine al-Qassam, which is responsible for hundreds of attacks against Israelis.

Ben-Eliezer claimed Shehadeh was planning a "mega-terror" attack inside Israel, "perhaps the biggest Israel has ever seen, a truck with a ton of explosives that was intended to shock the people of Israel and cause hundreds, hundreds of dead."

Israeli Foreign Minister Shimon Peres warned that Hamas would try to take revenge after the air strike. "I know that there is very serious escalation," he told Army Radio. "I fear that innocent people will pay for it dearly."

In Lebanon, a TV station run by Hezbollah guerrillas said a faction affiliated with Palestinian leader Yasser Arafat's Fatah movement was threatening to kill Israeli Prime Minister Ariel Sharon and other top leaders. There was no confirmation from Palestinians in the West Bank.

Palestinian Cabinet Minister Nabil Shaath said the Israeli air strike was aimed at scuttling a unilateral cease-fire that the Tanzim, a leading militant group, was set to declare. The Tanzim was also talking with other militant factions, such as Hamas, which were considering the proposal.

Hamas leaders have said that the Israeli attack canceled the pact, and that they will step up suicide bombing attacks.

However, Shaath said a new effort would be made to revive the plan. "We will resume our dialogue within the coming few days," he said.

Raanan Gissin, Sharon's spokesman, discounted the reports of a cease-fire in the making. "That's really nonsense," he said. "Allow us to be a little suspicious that such a document would have led to a cease-fire" after 22 months of fighting and multiple cease-fire declarations that did not take effect. Gissin said there were no signs on the ground that the Palestinians were moving to stop attacks.

In violence Thursday, Rabbi Elimelech Shapira, 43, was killed and another Israeli seriously wounded in a roadside ambush in the West Bank, the military said. Palestinians opened fire on their car near the Jewish settlement of Alei Zahav, south of the Palestinian town of Qalqiliya. Shapira was the director of a rabbinical seminary at the settlement of Paduel.

Also, another victim of last week's suicide bombing in Tel Aviv died of his wounds on Thursday, police said, identifying him as Dimitri Pundokov, 33. Three foreign workers and another Israeli were also killed in the attack on July 18, in which two suicide bombers blew themselves up a few seconds apart in a neighborhood where foreign workers live.

In the Jenin refugee camp, five Palestinians were wounded when a bomb went off next to their bus. Palestinian security officials said the bomb was planted several weeks ago, aiming for Israeli tanks.

Despite the violence, Israeli and Palestinian officials are continuing to meet. Peres said Israel would ease restrictions in the West Bank and free some of the funds Israel has been holding back from the Palestinians.