Israel was scaling back its 17-day offensive in the Gaza Strip (search) on Friday after Prime Minister Ariel Sharon (search) heeded the army's warning that an extended stay in crowded Palestinian areas is too risky and the United States called for a quick Israeli pullout.

Sharon's decision came hours after he told legislators Thursday that "Operation Days of Penitence," meant to stop Palestinian rocket fire on Israeli communities, would continue and even be expanded.

The prime minister's apparent zigzag reflected his dilemma: continued Palestinian rocket attacks undermine support for his planned withdrawal from the Gaza Strip in 2005, while a major military offensive invites international criticism because of heavy Palestinian casualties and does not stop the rocket fire entirely.

Since the Sept. 29 start of the Israeli campaign, triggered by a deadly rocket attack on the Israeli border town of Sderot (search), 108 Palestinians have been killed and hundreds wounded. Among the dead were dozens of civilians, including 18 minors.

Israeli tanks and bulldozers have left behind a wide swath of destruction in northern Gaza, damaging houses, tearing up water pipes and knocking down electricity poles as they charge through narrow alleys of densely populated areas.

In an 18-page report obtained Thursday by The Associated Press, the United Nations wrote that Israel has engaged in "massive and wanton destruction of property" in Gaza. The report, written before the current Gaza operation, said that while some of Israel's actions can be explained by security concerns, many cannot.

The Israeli government said the report, to be presented to the U.N. General Assembly later this month, does not address the actions of Palestinian militants, including smuggling weapons into Gaza and sending suicide bombers into Israel.

In Washington, State Department spokesman Richard Boucher said the United States hopes that Israel can end the Gaza operation "as soon as possible." He said that while the United States recognizes Israel's right to self-defense, "they should do it in a manner that concludes as quickly as possible and that minimizes any loss of civilian life or humanitarian consequences."

The Israeli offensive focused on the Jebaliya refugee camp (search) and the towns of Beit Hanoun and Beit Lahiya in northern Gaza, the main launching grounds for homemade Qassam rockets.

In the past two weeks, hundreds of Israeli armored vehicles have patrolled a five-mile stretch to try to move rocket launchers out of the range of Israeli border towns. Occasionally, tanks moved deeper into neighborhoods.

Sharon and Israeli Defense Minister Shaul Mofaz decided late Thursday to redeploy in northern Gaza and withdraw some of the troops.

A security official, speaking on condition of anonymity, said military commanders told Sharon the operation has played itself out. Troops would leave Jebaliya, the Palestinians' largest and a stronghold of militants, the official said.

In the camp, the tanks had held four positions on the eastern edge. On Friday morning, several tanks moved back from one of the positions, but remained in the other three. A day before, tanks had withdrawn from Beit Lahiya, after a two-day operation there, and tanks were now largely deployed outside neighborhoods.

By Friday afternoon, more than 10 tanks had withdrawn across the Gaza border into southern Israel, and military trucks were taking them away. The army declined to provide details, saying only that it was acting "in accordance with the decisions of the political echelon."

Palestinian gunmen in Jebaliya said they would remain in their positions, piles of sandbags in alleys covered with tarpaulins to stay out sight of unmanned Israeli surveillance aircraft, or drones.

Early Friday, an Israeli aircraft fired a missile at four militants in Jebaliya, killing two and critically wounding a third, witnesses said. A Hamas (search) militant died of wounds sustained in a missile strike two days earlier.

Israel's deputy defense minister, Zeev Boim, said troops would not withdraw from northern Gaza entirely. "The operation has not ended. I don't think there was an issue here of American pressure," he told Israel Radio.

He said the military has new techniques for spotting and hitting militants launching rockets — an apparent reference to drones Palestinians say have been hovering over the territory, sometimes firing missiles. "Even in the places ... where they are leaving, they have put in place alternatives to the ground forces," Boim said.

He also said the pullback was a gesture to Palestinians for Friday's start of the holy month of Ramadan. "We have no desire to make it difficult for the population," he said.

A Hamas leader in northern Gaza, Nizar Rayan, told gunmen in a speech broadcast on a local radio stations that they should remain in their positions and pray there, instead of attending Ramadan services at mosques.

Hamas gunmen in Jebaliya claimed victory. "We stopped them (Israeli troops) with our humble abilities and resistance methods," said one masked gunman, who gave only his nom de guerre, Abu Obeida.