A Palestinian rocket slammed into a street in this southern Israeli town Wednesday, killing two preschool children playing in a yard as Israelis ushered in the fall harvest festival of Sukkot (search).

Prime Minister Ariel Sharon (search) phoned Sderot (search) Mayor Eli Moyal and told him that "Israel will respond" to the attack, a government official said.

The rocket attack came in defiance of a major Israeli raid into the nearby Gaza Strip (search) aimed at rooting out militants behind an unending wave of rocket attacks in recent weeks. The raid, which began late Tuesday, killed four Palestinians and wounded 46 others, Palestinian hospital officials said.

In response to the Sderot attack, Israeli security officials said they would broaden the operation in northern Gaza; an Israeli helicopter strike near a Gaza refugee camp killed one Palestinian militant and wounded another.

Elsewhere in the West Bank (search) and Gaza Strip, seven Palestinians, including a 14-year-old boy, were killed by Israeli army fire.

The government official said Sharon promised Moyal that the military would make it more difficult for Palestinians to launch missiles at the border town. The official, who spoke on condition of anonymity, did not give details.

The rocket slammed into a quiet street early Wednesday evening, just as Sukkot was beginning. Most residents in the neighborhood are immigrants from Ethiopia and the former Soviet Union.

The blast blew out the windows of a house, showered a minibus with shrapnel and killed two children of Ethiopian descent. Dorit Benesay, 2, and Yuval Abeva, 4, were playing under an olive tree outside Yuval's grandmother's house when the rocket struck, emergency workers and neighbors said.

"After the rocket fell, a man, maybe 20 years old, took the boy in his arms. He was in shock. He ran with the boy, he didn't know what to do," said Zina Shurov, 48, a neighbor. "I saw the boy, he had no legs."

The homemade Qassam rocket was the 30th to hit Israeli communities in the past month and the 14th to hit Sderot in that time, according to the Israeli army.

"We live from Qassam to Qassam. The situation gets worse and worse every day," said Mordecai Moyal, a Sderot resident.

The Islamic militant group Hamas claimed responsibility for the rocket attack in a statement on its Web site, and the group said it would not abandon the rocket attacks.

"We will continue with this honorable battle until we achieve either victory or martyrdom," Nizar Rayan, a local Hamas leader, said in Jebaliya.

The violence highlighted the failure so far of Israel's increasingly intense efforts against militants firing the rockets from Gaza. The militants have been intensifying anti-Israel attacks ahead of the Jewish state's announced pullout from Gaza scheduled for next year.

The rockets are inaccurate and often ineffective, but they have created fear in Israeli border towns. A previous attack in June killed two Israelis in Sderot.

"Once again we are witness to a brutal terror attack aimed at hurting innocent women and children. Once again such a deliberate attack takes place on the eve of a Jewish holiday," said Gideon Meir, an Israeli government spokesman. "No state can tolerate such an attack on its citizens, and it is the government's obligation to protect its citizens."

In response to the ongoing rocket attacks, about 110 Israeli vehicles — including tanks, armored personnel carriers and bulldozers — swarmed late Tuesday into a swath of northern Gaza that militants have used as a staging ground for launching Qassams, witnesses said.

In clashes that continued into Wednesday, militants battled Israeli troops, who responded with machine gunfire and tank shells.

Late Wednesday, dozens of Palestinian gunmen were seen taking up positions near the Jebaliya refugee camp. Israeli helicopter gunships flew overhead and machine gun fire could be heard coming from tanks and helicopters.

The Israeli military also said it had closed checkpoints Wednesday, cutting Gaza in three to prevent ammunition from being transported throughout the territory.

Basher Hamouda, 55, who fled with his family, criticized the destruction caused by the repeated Israeli raids but also questioned the wisdom of the Palestinian rocket attacks.

The militants need "to look around and see what mortar shells and rockets brought to northern Gaza ... nothing but distractions and killing," he said.

Palestinian Cabinet Minister Saeb Erekat condemned the operation.

"At a time when the Israeli government is talking about withdrawal and disengagement from Gaza, it is obvious that what is happening is the preparation for reoccupying Gaza," he said.

The Israeli military said it was taking a new approach that would include fast, surgical raids on areas used to launch rockets. Past Israeli incursions have been spread out over wider areas.

In other violence:

—An Israeli helicopter fired rockets near Jebaliya on Wednesday night, killing a 24-year-old Palestinians, hospital officials said. Israeli military sources said the strike targeted militants trying to plant an explosive device.

—On Wednesday morning, the military launched an airstrike against three men preparing to launch a rocket from an area east of Jebaliya, the military said. At least one of the militants was hit.

—A 22-year-old Hamas militant was killed in a gunfight with Israeli forces near Jebaliya, Palestinians sources said.

—Early Wednesday, two Palestinians wearing school uniforms were shot and killed by Israeli forces near Jebaliya, Palestinians said. The Israeli army said it shot at two men trying to lay a bomb during the raid and presumed them dead.

—Mohammed Jaber, 14, was killed after Israeli soldiers shot at a group of students throwing stones at them near the settlement of Netzarim in central Gaza, hospital officials said. The army said soldiers shot a person running toward them in a no-go zone.

—A wanted Palestinian man was killed in Nablus when he tried to flee Israeli troops who had come to arrest him, the army said. Palestinians identified the man as Majdi Halifa, a member of the Al Aqsa Martyrs' Brigades, which is linked to Palestinian leader Yasser Arafat's Fatah movement.

—Also in the West Bank, two Palestinians were killed when the army fired at a taxi approaching the town of Jenin, Palestinian witnesses said. The army said the taxi had been carrying a wanted militant, and that soldiers opened fire after the driver refused orders to stop. It said the taxi crashed, killing one person on board and that soldiers shot a second person who fled.