Israeli tanks and troops inched into northern Gaza early Thursday after militants fired a rocket at an Israeli city for the second day in a row, signaling the largest Israeli military operation in the seaside territory since Israel withdrew a year ago.

A homemade rocket exploded in Ashkelon on Wednesday, hitting the southern Israeli city of 110,000 that used to be out of range. Hamas, the Islamic terrorist group that runs the Palestinian government, claimed responsibility. No one was hurt, but Israeli leaders repeated their pledge to hit back hard.

Thousands of Israeli troops and armored vehicles were poised on the Israel-Gaza border, prepared to clear out a buffer zone in northern Gaza to push the militants and rocket launchers back.

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CountryWatch: Israel

The main question was whether Israeli forces would enter two large Palestinian towns, Beit Hanoun and Beit Lahiya, engaging in bloody house-to-house combat where militants operate freely and set up their launchers, or stop on the outskirts.

Before daybreak, Israeli troops and about 15 tanks entered three Gaza Jewish settlements destroyed after the September pullout — Nissanit, Dugit and Elei Sinai, according to an AP reporter who saw the troop movements. The settlements are just across the border, and the new line stretched across most of the narrow northern part of the territory. The Israeli military would say only that its forces were operating in northern Gaza.

As Israeli ground forces edged forward, Israeli artillery and aircraft struck targets in the area, aiming at bases and groups of militants. Hamas officials said one militant was killed and another wounded in an airstrike on the Gaza beach early Thursday. The military said aircraft hit an armed militant.

In another incident, two people, a Hamas militant and a Palestinian policeman, were killed and 11 others wounded in an explosion on the northern Gaza beach. Palestinians said Israeli tanks or gunboats shelled the area, Israel denied that, but the military was checking whether an airstrike was involved.

Also, Israeli forces remained in southern Gaza, where they invaded after a June 25 attack on a border post in which two soldiers were killed and a third captured. Israel said a main goal of the military operation in Gaza continues to be winning freedom for the soldier, Cpl. Gilad Shalit, 19.

With Israeli forces on the move, several tanks fired shells at Beit Lahiya, Palestinian officials and witnesses said.

A car carrying a crew from the Arabic satellite TV channel Al-Jazeera in the town came under fire from Palestinians, wounding two, according to one of the reporters in the car, Wael Dahdouh. He said the gunmen apparently thought the reporters were Israeli undercover agents.

An official statement from Israeli Prime Minster Ehud Olmert's office gave no details about the military operation, but said the army would continue to go after Hamas militants and their infrastructure. It said the army has been ordered to "prepare for a phased and continuous" operation. Its main goals remain to find Shalit and to prevent more rocket fire on Israeli towns and cities, the statement said.

But it could lead to reoccupation of parts of the dusty, overpopulated territory, less than a year after Israel withdrew. Before the June 25 attack, Israel had refrained from sending ground forces into Gaza, while carrying out dozens of airstrikes against militants.

At his daily briefing, U.S. State Department spokesman Sean McCormack said Palestinians must release the soldier and stop the rocket attacks, but he called on Israel to show restraint so that in the future, "there is the possibility of a negotiated settlement."

Egyptian and Turkish mediators are trying to end to the worsening crisis caused by the capture of Shalit.

The Hamas-linked militants holding him have demanded that Israel release hundreds of Palestinian prisoners in exchange for information about the captive. Israel has publicly refused to negotiate with the militants holding Shalit, but it could be indirectly communicating with Hamas through the mediators.

In a statement, U.N. Secretary-General Kofi Annan called on both sides to "step back from the brink." He said the soldier must be released and Israel must avoid collective punishment of the Palestinian people.

Israel clamped a total closure on Gaza after the soldier was captured, trying to prevent militants from moving him out of Gaza. In the last two days, Israel has reopened two crossings to allow badly needed food and fuel into Gaza.

The Rafah crossing from Egypt to Gaza is to open Thursday to allow 2,000 Palestinians stuck there by the fighting to return home, said Salim Abu Safiah, director of the border authority. He said other Palestinians were waiting in nearby Egyptian towns to come home.