Israeli tanks shelled downtown Gaza City on Thursday and ground troops thrust deep into a crowded neighborhood for the first time, sending terrified residents fleeing for cover and increasing pressure on Hamas rulers to accept a proposed cease-fire to end Israel's offensive.

The U.N. refugee agency also said its Gaza headquarters has been struck by Israeli artillery fire and the building was ablaze.

Spokesman Chris Gunness says the building was hit by what was believed to be three white phosphorous shells. The weapons burn at extremely high temperatures and can set things on fire.

A senior Israeli military officer said Israeli troops shelled the complex after coming under fire from Palestinian militants.

The artillery attack set the compound on fire, destroyed tons of food and humanitarian supplies and forced hundreds of refugees to flee.

Gunness says the building had been used as a shelter for hundreds of people fleeing Israel's offensive. He said three people were injured.

The U.N. chief says he has expressed "strong protest and outrage" to Israel over the shelling of the United Nations compound in Gaza City.

Israeli said it does not target U.N. buildings or personnel. But the senior military officer said troops opened fire after militants inside the compound shot anti-tank weapons and machine guns. He said the troops used 155 mm artillery shells.

The officer spoke on condition of anonymity pending a formal announcement expected later Thursday.

Throughout the offensive in Gaza, Israel has accused Hamas militants of hiding in civilian areas to stage attacks.

Ban Ki-moon is demanding an investigation into Thursday's shelling. He said Israeli Defense Minister Ehud Barak has told him it was a "grave mistake."

The Israeli military would not discuss its operations and it was not clear whether the intensified assault on Gaza City signaled a new phase in the three-week-old Israeli campaign that Gaza health officials say has already killed more than 1,000 Palestinians. Thirteen Israelis have been killed since the offensive began, according to the military.

Ban told Israel on Thursday that the death toll from fighting in the Gaza Strip had reached an "unbearable point," Reuters reported.

Israel has balked at all-out urban warfare in the narrow alleyways of Gaza's big cities, where Hamas militants are more familiar with the lay of the land and Israeli casualties would be liable to spiral. But Palestinian witnesses said Israeli tanks fired shells at least three high-rise buildings in the downtown area as ground troops advanced into a crowded residential area on the outskirts of the city.

Click to view photos from the conflict.

The advance into Gaza City's Tel Hawwa neighborhood and the shelling of downtown Gaza City came as United Nations chief Ban Ki-moon was due to arrive for meetings with Israeli and Palestinian leaders. He was coming from Egypt, which has been working with Israel and Hamas to secure at least a temporary halt in fighting.

Israel launched the offensive on Dec. 27 in an effort to stop militant rocket fire from Gaza that has terrorized hundreds of thousands of Israelis. It says it will press ahead until it receives guarantees of a complete halt to rocket fire and an end to weapons smuggling into Gaza from neighboring Egypt.

Rocket fire has fallen off dramatically but not ceased and on Thursday the military reported 14 firings.

An explosion blasted a tower block in the city of Gaza on Thursday that houses the offices of Reuters and other media organizations, injuring a journalist for the Abu Dhabi television channel, Reuters reported.

Thousands of Tel Hawwa residents fled their homes Thursday, many clad only in their pajamas, and some wheeling elderly parents in wheelchairs, one of them with an oxygen tank. Others stopped journalists' armored cars and ambulances pleading for someone to take them to a U.N. compound or to relatives' homes.

The crackle and boom of explosions from machine gun fire, tank shells and missiles split the air, already clouded with plumes of white and black smoke from Israeli gunfire. Tanks and bulldozers rolled into a neighborhood park, apparently seizing it as a kind of command center, witnesses said.

Masked gunmen ran toward the areas under fire carrying bags containing unidentified objects.

Rasha Hassam, a 25-year-old engineer, ran out of her apartment building carrying her screaming, crying, 6-year-old daughter, Dunia.

"God help us, God help us, where can we flee?" she cried. "All I want is to get my poor child away from here. We want to survive."

Thousands of others were trapped in Tel Hawwa's high-rise buildings by the fire, too afraid to even attempt to flee.

Israeli aircraft struck some 70 targets overnight, including weapons positions, rocket squads and a mosque in southern Gaza that it said served as an arsenal, the military said. One target was the Islamic University in Gaza City, a Hamas stronghold.

Clouds of white smoke covered the eastern section of the city while a pillar of black smoke towered over the western portion following air, tank and naval fire that set houses and farmlands ablaze.

Human rights groups have accused Israel of unlawfully using white phosphorous shells against populated areas. The weapon can burn anything it touches and is used to illuminate targets at night or create a smoke screen for day attacks.

The Israeli military has said only that it uses munitions in accordance with international law. The International Committee for the Red Cross has said it has no evidence that Israel has improperly used the shells.

Ban launched a weeklong trip to the region on Wednesday, hoping his heft will help to pursue the case for a truce a week after the U.N. Security Council passed a cease-fire resolution.

Ban will also meet with Palestinian leaders in the West Bank, where Western-backed President Mahmoud Abbas governs. He will not visit Gaza, which has been ruled by Hamas since it expelled forces loyal to Abbas in June 2007. The international community does not recognize Hamas' government.

In a sign of progress, Israel's chief negotiator, Amos Gilad, arrived in Cairo for truce talks with the Egyptian mediators.

Mark Regev says the envoy will discuss the "parameters of the end game" with the Egyptians. Gilad flew to Cairo Thursday on a private plane.

Regev says Israel wants a total end to Hamas' rocket launches into Israel, and an arms embargo on Gaza's militant rulers.

He will not be meeting Hamas envoys who are also in town.

World pressure on Israel to halt its offensive has increased because hundreds of civilians have been killed in the relentless pounding that has reduced landmarks, apartment buildings and some mosques to rubble.

The war has killed more than 1,000 Palestinians, about half of them civilians, including 300 children and teenagers, said Dr. Moaiya Hassanain of the Gaza Health Ministry. More than 4,500 Palestinians have been wounded, medical officials said.

In an interview with the British Broadcasting Corp. broadcast late Wednesday, Syrian President Bashar Assad said Hamas was ready for a "sustainable cease-fire," and that Syria was working for a truce.

It was the first indication that Syria, which hosts the exiled Hamas leadership, was involved in the cease-fire effort, or that Hamas was considering a long-term deal.

In an effort to end the bloodshed, Egypt was pressing both sides to accept a 10-day truce while details of a more comprehensive accord can be worked out.

In Cairo on Wednesday, Egyptian and Hamas officials expressed optimism that an agreement for a temporary halt in fighting could be sealed soon and presented to Israel. But even if all sides signed on, further talks would be needed to resolve disputes over policing Gaza's borders against arms smuggling and ensure a longer-term truce.

But Egypt's U.N. Ambassador Maged Abdelaziz told a U.N. Security Council meeting Wednesday evening that neither side had accepted the Egyptian plan. "Each believes that it will emerge victorious" from the conflict, he said.

Israel has made clear that the Cairo talks are key to determining whether it widens its offensive and sends thousands of reservists into the crowded urban areas.

Under the Egyptian proposal, Hamas would back off its demand that Israeli troops withdraw from Gaza and borders be opened immediately as part of any halt in fighting.

Instead, Israeli forces would remain in place during a 10-day truce until details on border security are worked out, Egyptian and Palestinian officials close to the talks told The Associated Press. They spoke on condition of anonymity to provide details of the closed-door negotiations.

A senior Israeli official said it was far from certain Israel would accept the deal. He said Israel welcomed many parts of the plan, but was afraid Hamas would not respect a cease-fire as long as troops are in Gaza.

The Israeli officials spoke on condition of anonymity because they were not authorized to talk to the press about diplomatic issues.

Israel rejects charges that its blockade has caused a humanitarian crisis, saying it has let more than 1,000 truckloads of supplies into Gaza during the fighting. Some 170 trucks were due to enter Gaza on Thursday, including food, medical supplies, fuel and animal feed.

The Associated Press contributed to this report.