Israeli Prime Minister Ehud Olmert on Sunday gave his military a "free hand" to hit Gaza militants after a rocket slammed into a house in an Israeli town following a visit there by the new U.N. humanitarian chief, who called for an end to the daily salvos.

Speaking in Jerusalem at a gathering of the Conference of Presidents of Major American Jewish Organizations, Olmert said he would not allow a humanitarian crisis to develop in Gaza, but the people of Gaza could not live normal lives while Israelis across the border were constantly targeted by rockets.

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Olmert said Israel's military has a "free hand" to hit Gaza militants. "We will reach out for anyone involved in perpetrating terrorism against Israelis, and we will not hesitate to attack them in order to stop them," he said. "That applies to everyone, first and foremost Hamas. Hamas is in charge of Gaza."

Early Sunday Israeli ground forces entered Gaza, backed by aircraft. In clashes, three Palestinian militants and a civilian were killed, and an Israeli soldier was seriously wounded. Palestinian health officials said more than 20 people were wounded, including several gunmen and a 45-year-old civilian who was shot in the head.

The military said the target was the Gaza "terror infrastructure," and more than 80 Palestinians were taken for questioning.

John Holmes, the U.N. undersecretary general for humanitarian affairs, had just left Sderot, where he made an appeal for an end to the rocket fire from Gaza, when a rocket exploded in a house there.

No one was seriously hurt. Medics helped a shell-shocked woman from the house and took her for treatment.

Battered by rockets almost every day, Sderot is an inviting target, a town of 20,000 less than a kilometer (half a mile) from the Gaza fence. Twelve people have been killed in recent years and dozens wounded, including an 8-year-old boy who lost a leg in an attack last week.

"We condemn absolutely the firing of these rockets. There's no justification for it. They are indiscriminate, there's no military target," Holmes told The Associated Press during his visit to Sderot.

Israeli airstrikes and ground incursions into Gaza have killed dozens of militants in recent months but have failed to stop the rockets. Israeli leaders have warned that a broad ground operation is increasingly likely.

Holmes countered that Israel and the Palestinians must make peace.

"At the end of the day, the only thing that will make a lasting difference is a peace settlement," he said. "You can't stop these problems militarily. They have to be solved through negotiations."

Israel is trying to negotiate a peace agreement with the moderate West Bank-based government of Palestinian President Mahmoud Abbas.

Palestinian negotiator Saeb Erekat said Sunday that Abbas would meet Tuesday with Olmert. The two have had regular meetings, but no progress has been reported.

In his address Sunday, Olmert said Abbas agreed that the issue of Jerusalem would be the last item on the agenda. "We will not start negotiations with the most sensitive issue that could end negotiations before we start," he said.

The two sides relaunched talks in November at a Mideast conference hosted by U.S. President George W. Bush, setting a December 2008 target for reaching a final accord.

In his address, Olmert said one possibility is signing a declaration of principles, but insisted a peace accord cannot be implemented unless "terror is stopped completely from Gaza."

"I hope the negotiating part of the basic principles can still be achieved in 2008," he said. He said waiting longer would encourage more radical elements among the Palestinians, especially Hamas.

"I will not hesitate to make every painful compromise that is needed to bring true and genuine peace," he said, while refusing to compromise on Israeli security.

He said the current Palestinian leadership is committed to peace with Israel "like no Palestinian leadership before," warning that if the effort fails, no future Palestinian regime would be as willing to make peace.

During Sunday's tour of Sderot, Holmes met with residents affected by the incessant rocket salvos.

Holmes nodded quietly as residents, some in tears, told their stories. A man lifted his shirt and showed Holmes a shrapnel wound on his belly. A woman told him she lost a fetus after going into shock when a rocket landed near her. The woman added that a teenage daughter of hers tried to slash her wrists after one rocket attack.

Also visiting Israel on Sunday was French Foreign Minister Bernard Kouchner, who called on Israel and Hamas to negotiate a truce. "Hamas must stop firing, targeting (rockets) at Israel, and the Israeli people must answer," he told The Jerusalem Post daily.

Deputy Defense Minister Matan Vilnai rejected talks with Hamas, saying it was a terror group that does not recognize Israel's right to exist. "For now, there is nothing to talk about," he told Army Radio.