The commander of Israeli military intelligence warned Tuesday that Palestinian militants would try to launch a large-scale attack on Israel's 60th anniversary celebrations next month. He was speaking as the two sides traded charges after a Gaza mother and four small children died in a blast at their house during Israeli-Palestinian fighting.

The intelligence chief, Maj. Gen. Amos Yadlin, told Israel's Cabinet, "There are attempts to carry out a 'quality' attack of either kidnapping Israeli civilians or a major bombing" during the celebrations. He compared the potential attack to a homicide bombing on a Jewish holiday in 2002 that killed 30 people at a hotel on Israel's coast. His remarks were released by the Israeli Prime Minister's Office.

Israel is expected to impose strict security measures, including a ban on Palestinians entering the country, around the time of Israel's Independence Day on May 8. Among the VIPs expected to attend the festivities, which are scheduled throughout the month, is U.S. President George W. Bush.

Palestinians mark the occasion as a day of mourning, because about 700,000 Palestinians fled or were driven out of their homes during the two-year war that followed Israel's creation in 1948.

Yadlin addressed the closed part of the Cabinet meeting after Israeli Prime Minister Ehud Olmert made a public statement at the beginning, expressing regret at the death of the mother and children in northern Gaza on Monday.

But he laid the blame on Hamas for allowing militants to operate within residential areas and "turning the civilian population in Gaza into an indivisible part of its war."

Palestinian officials and relatives said Monday the blast was caused by a tank shell. But the Palestinian Center for Human Rights said in a statement Tuesday that the mother and children were killed by the blast of an air-fired missile aimed at a militant about 10 meters (30 feet) away from the family's home. The group gathers its information from witness accounts.

Israel said it entered Beit Hanoun in pursuit of gunmen who approached a border patrol.

The Israeli human rights organization B'Tselem demanded that the military release footage from the aircraft that fired the missiles in Beit Hanoun, so ballistics experts could determine whether there was a secondary blast caused by militants' explosives, as Israel claims.

A military commission headed by a colonel is expected to report Wednesday on its investigation of the incident.

Egypt has been trying for weeks to arrange a cease-fire between Israel and Gaza militant groups.

Last week, Hamas said it would accept a six-month cease-fire with Israel, provided Israel ends the economic blockade it imposed on Gaza after Hamas violently wrested control of Gaza in June. The blockade has caused shortages of fuel, cement and other basic items and has deepened unemployment in the impoverished territory,

Yadlin told the Israeli Cabinet on Tuesday, "Hamas is exploiting the situation to give the illusion of a crisis," blaming Hamas for the fuel shortage. On Tuesday, several human rights groups called on Israel to relax its restrictions on fuel supplies to Gaza.

Israeli Defense Minister Ehud Barak scoffed at talk of truce efforts.

"I think now we're in a showdown with Hamas," Barak told reporters. "That's a more apt description than a possible cease-fire."

While going after Gaza militants, Israel is engaged in peace talks with Hamas' chief rival, moderate Palestinian President Mahmoud Abbas.

In August, Israel offered to stop hunting down dozens of West Bank militants linked to Abbas if they agreed to halt violent activities. Six months later, a senior Israeli security official said the amnesty program has been a success.

Militants seeking amnesty are required to surrender their weapons, serve a brief sentence in a Palestinian jail and pass a probationary term.

According to the official, 281 gunmen have accepted the offer, and just six have returned to violence.

He was not permitted to be identified under security guidelines.