A Palestinian rocket fired from Gaza exploded on a street in southern Israel on Wednesday, killing one passerby, critically injuring another, and raising the possibility of a new Israeli military offensive against militant rocket squads.

Militants affiliated with the Palestinians' ruling Hamas group and Islamic Jihad both claimed responsibility for the first deadly rocket attack from Gaza since Israel withdrew in September 2005. They said the rocket fire was meant to avenge the deaths of 18 civilians killed last week in an Israeli shelling of an apartment compound in the northern Gaza town of Beit Hanoun.

That shelling, which Israel said was unintended, came after Israeli troops wound up a weeklong incursion in Beit Hanoun meant to curb Palestinian rocket attacks on Israel from the town. But rocket attacks continued from other spots in Gaza during the incursion, and resumed from Beit Hanoun after the troops pulled out.

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The rocket fell Wednesday in the town of Sderot, about 150 meters (yards) from the home of Defense Minister Amir Peretz.

Leah Malul, a spokeswoman for Barzilai hospital in Ashkelon, said a woman was killed, a man was critically injured and several other passersby were slightly wounded by shrapnel.

Police identified the critically injured man as a member of Peretz's security detail, who was on patrol around the defense minister's house when the rocket hit.

David Baker, an official in the office of Prime Minister Ehud Olmert, said Israel's battle against rocket squads clearly had not ended.

"The continued Palestinian rocket attacks on Sderot and surrounding communities inside Israel are clear evidence that Israel cannot let up in its defense of its citizens and must root out these rocket launchers as well as those who perpetrate these attacks," Baker said.

Although the homemade projectiles are primitive and rarely cause casualties, they have killed eight other people since 2001, most recently in July 2005. The near-daily rocket fire has badly unnerved residents of places, like Sderot, that are frequent targets.

Peretz planned to convene a special meeting of senior security officials later in the day.

"Terror organizations will pay a heavy price," he warned in a statement.

On Wednesday, Public Security Minister Avi Dichter told Army Radio that Israel must broaden its operations to bring about "a complete halt" to rocket fire, "whether that means a ground operation, or an air operation or other special operations."

Hamas spokesman Fawzi Barhoum said the Palestinians acted in self defense.

"The occupation hasn't stopped attacking Palestinians before or after Beit Hanoun, so we say resistance is a right of Palestinians," Barhoum said.

The rocket fire coincided with Palestinian efforts to form a new unity government that might be moderate enough to induce the West to ease crippling economic sanctions.

Hamas insisted Tuesday it wouldn't recognize Israel even after a new government takes power, but suggested the emerging coalition would be free to stake out a more moderate position.

Palestinian President Mahmoud Abbas, a moderate from the rival Fatah Party, hopes Israel and the West will accept the premise that Hamas is largely ceding power by making room for a 24-member Cabinet of independent professionals.

But the Islamic militants get to appoint nine of the ministers and would retain considerable control — without abandoning their violent ideology — so it's not clear the new setup will be enough to cause both Israel and the West to restore the flow of hundreds of millions of dollars cut off to pressure Hamas to moderate.

On Wednesday, envoys of the so-called Quartet of Mideast mediators — the U.S., the U.N., the EU and Russia — were to meet in Cairo, in part to be briefed on the coalition talks.

A months-long deadlock over whether the new government would recognize Israel is to be solved by a division of labor: Abbas and his Palestine Liberation Organization would lead peace talks with Israel, while the government of experts would run daily life in the Palestinian territories.

An agreement on a new government would be closely linked to a Hamas-Israel prisoner swap and a promise by Gaza militants to halt rocket attacks on Israel.

Egyptian intelligence chief Omar Suleiman is to try to conclude a swap in a visit to the Palestinian territories, starting Saturday.

Abbas has promised Hamas he would not present the new government to parliament for approval until Hamas politicians imprisoned in Israel have been released.

Such a deal could pave the way for a long-overdue meeting between Abbas and Olmert. Abbas has been reluctant to meet while the Israeli soldier is in captivity, for fear Olmert would only discuss the serviceman's fate.

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