Under heavy cover fire from helicopters, Israeli troops combed this refugee camp for weapons and gunmen Tuesday in the biggest Gaza (search) offensive in years. Twenty Palestinians were killed, including two teenagers shot as they gathered laundry.

The death toll was the highest one-day total since 35 Palestinians were killed in the West Bank city in Ramallah on April 5, 2002.

International condemnation mounted against the operation, and the United States said it was asking Israel for "clarification." The United Nations (search) and European Union (search) demanded an end to the incursion, which Israeli security officials said would last at least a week.

Early Wednesday, Israeli troops and tanks entered the refugee camp next to the West Bank town of Jenin, Israel Radio reported, killing a local leader of the Al Aqsa Martyrs Brigades (search), linked to Yasser Arafat's (search) Fatah movement. The military had no immediate comment.

In Rafah (search), a crowded camp of 90,000 people near the Egyptian border, Palestinian families sought refuge from the rocket and machine-gun fire in the innermost rooms of their homes.

Electrician Khaled Al-Assar, 38, said he sat with his wife and five children in one room of their house as gunfire rattled all around and a missile landed nearby, shattering windows.

"The kids were terrified, there was very loud boom, they started screaming and crying," he said.

Not everyone stayed inside, and the consequences could be deadly. Ahmed Mughayer, 13, and his sister Asma, 16, were killed by Israeli fire when they ventured onto the roof of their three-story apartment building to bring in laundry, their father Mohammed said.

Mughayer said his wife had told Asma not to go out because of the shooting. "Asma said, 'Don't worry, I'll be careful,"' he said.

The Israeli army said the aim of "Operation Rainbow" was to destroy weapons-smuggling tunnels and arrest Palestinian militants. It said it did not intend to demolish large numbers of Palestinian homes. Troops tore down four homes Tuesday, witnesses said.

Last week, Israel destroyed about 100 houses, making more than 1,000 Palestinians homeless.

Troops moved Tuesday into the Tel Sultan neighborhood on the outskirts of the Rafah camp. Bulldozers began tearing up a road to separate the neighborhood from the rest of the camp, and soldiers backed by about 70 armored vehicles conducted house-to-house searches, sometimes using bulldozers to knock down doors.

The army said most of the casualties were gunmen killed by missiles or machine-gun fire as they prepared to attack troops.

Residents said at least nine civilians were among the dead. At least 42 Palestinians were wounded.

Some Palestinians tried to reach safer ground. Thousands have left their homes in Rafah since the weekend, hauling away their possessions on tractors and donkey carts.

In all, 19 Palestinians in Rafah were killed by Israeli fire -- 10 in two missile strikes, and nine by machine-gun fire, said Dr. Moawiya Hassanain, a Palestinian Health Ministry official. A 20th man was killed while handling explosives.

Israel said both missile strikes, including one outside a mosque, were aimed at gunmen.

Palestinian ambulance drivers reported coming under fire, and Hassanain said several ambulances were unable to evacuate the wounded.

The army denied soldiers fired at ambulances, and said it was allowing some ambulances to drive to Khan Younis, which has a better-equipped hospital than Rafah, along an otherwise closed road.

Palestinian leader Yasser Arafat denounced the operation as a "planned massacre."

"What is happening in Rafah is an operation to destroy and to transfer the local Palestinian population, and this must not be accepted, not by the Palestinians, nor the Arabs, nor by the international community," a visibly angry Arafat told reporters at his West Bank compound.

Although Israel says it is targeting Rafah to destroy arms-smuggling tunnels, security officials have said the army also planned to widen a patrol road between the camp and Egypt, which would mean demolishing rows of houses.

Israeli army chief Lt. Gen. Moshe Yaalon said homes would only be demolished if gunmen used them as firing positions or to cover up tunnels.

The threat of mass house demolitions drew strong international criticism, including from the United States.

President Bush termed the violence "troubling," but said Israel had the right to defend itself from terrorism.

"The Israeli people have always had enemies at their borders and terrorists close at hand," Bush told a pro-Israel lobby group. "Again and again Israel has defended itself with skill and heroism."

Former Gaza security chief Mohammed Dahlan said the United States had the power to stop the incursion -- but would not in an election year. "If the Americans want to end it they can stop it by one statement, but they don't want to," he told a Gaza radio station.

EU foreign policy spokesman Javier Solana said the destruction of homes violated both the letter and the spirit of the "road map" peace plan. The EU's Mideast peace envoy, Marc Otte, was in Israel for talks with diplomats and security officials, carrying a demand that the Rafah demolitions cease.

U.N. Middle East envoy Terje Roed-Larsen said diplomats were relieved that Israel had refrained from large-scale house demolitions, but said the military operation "runs counter to the provisions of the road map, it fuels anger and resentment among Palestinians."

Jordan also called on Israel to stop its assault. Arab League Secretary-General Amr Moussa described Israeli actions in Rafah as "war crimes."

Israeli Prime Minister Ariel Sharon has proposed a unilateral pullout of soldiers and settlers from Gaza, but his party turned down the plan.

In other violence Tuesday, two Palestinians were killed by Israeli army fire in the West Bank, one in Nablus and one near Jenin.

A Palestinian wounded in fighting in the northern Gaza Strip last month died of his injuries Tuesday in a Gaza hospital, Palestinian medical officials said.