Israeli troops backed by helicopters and armored bulldozers battled Palestinian gunmen in this northern Gaza Strip (search) town Thursday. At least seven Palestinians were killed, including the local commander of the Hamas (search) militant group, Palestinians and the army said.

An explosion also hit an Israeli army jeep traveling near the Jewish settlement of Morag in southern Gaza on Thursday, wounding five soldiers, the army said.

The army said two officers were moderately wounded, while three soldiers suffered slight wounds. It said it was investigating the cause of the blast.

The Islamic Jihad (search) militant group claimed responsibility for the attack, saying it had detonated a roadside bomb in retaliation for "the ugly Zionist massacre" in the north.

It was the deadliest violence in Beit Hanoun (search) since the army invaded the area early last week in an effort to prevent militants from firing homemade rockets into Israel. The troops had remained on the outskirts of town before Thursday.

Snipers took up positions on rooftops, shooting armed men and other suspicious figures, while helicopter machine guns fired down from time to time. Palestinian gunmen took to the streets to fight the troops.

The army said it had entered the center of Beit Hanoun because rockets had been fired from the area. Armored Israeli bulldozers also destroyed dozens of olive and orange trees and razed land along the eastern side of Beit Hanoun.

Col. Avi Levy, commander of the operation, said the agricultural areas had been used for cover by militants firing rockets.

"We are taking over the same areas that they use to fire from," he said. "Unfortunately, it requires us to remove those same orchards the other side uses as cover." He said the operation would continue "as long as necessary."

Five militants, including Hamas commander Nahed Abu Ouda, were killed, Palestinian officials said. A middle-aged man and a 35-year-old woman also died.

One Israeli soldier was seriously wounded, the army said. The army said it had killed or hit at least eight Palestinians.

Palestinian witnesses reported that there were dead and wounded lying in the streets of Beit Hanoun, but they could not be evacuated because of the fierce fighting.

"We are in a real battlefield. Shooting is coming from all directions and I saw two people fall wounded in front of my house," said Ramadan Zaneen, 42, a farmer.

The army raided Beit Hanoun last week after militants fired a barrage of homemade rockets at the Israeli border town of Sderot (search), killing two people, including a 3-year-old boy. The deaths were the first in a Palestinian rocket attack from Gaza since fighting erupted nearly four years ago.

Palestinian militants and the army said the homemade rockets had been upgraded to make them deadlier.

The new weapon could threaten Prime Minister Ariel Sharon's (search) plan to withdraw from Gaza. Hard-line critics say an evacuation of the coastal area would put more Israeli population centers in range of the inaccurate, but deadly, rockets.

Meanwhile, Israeli armored vehicles and bulldozers raided the Khan Younis (search) refugee camp in southern Gaza early Thursday, partially or completely destroying 30 houses and wounding at least four Palestinians.

The army said the operation was aimed at destroying abandoned buildings used by militants to fire mortars and other weapons at Israeli targets.

"We condemn this and hold the Israeli government fully responsible for attempts to revive the peace process," said Palestinian Cabinet Minister Saeb Erekat.

Violence has spiraled in the Gaza Strip since Sharon announced his plans to evacuate all Gaza Strip and four West Bank settlements next year. Israel and Palestinian militants are vying to make the pullout look like a victory.

The fighting erupted hours after the so-called Quartet of Mideast mediators — representing the United States, the European Union, the United Nations and Russia — wrapped up a series of meetings. The diplomats arrived in the region to discuss Sharon's Gaza pullout plan, although Israel snubbed the envoys.

The Quartet wants the withdrawal to be part of the "road map," its broader peace plan that envisions an independent Palestinian state by 2005.

Israeli officials, however, decided not to meet with the diplomats during a stop in Jerusalem on Tuesday — the latest sign that the Jewish state is attempting to exclude Europeans from Mideast peacemaking ahead of its planned Gaza withdrawal.

Sharon's spokesman, Asaf Shariv, said Israel doesn't want to work with the Europeans on security issues. "There are a lot of other issues, like economic, that we would be happy to work on with the Europeans," Shariv said.

Shariv said Israel first wants to talk to a White House delegation arriving later this week before discussing the withdrawal plan with others.

Israel has often accused Europe of being biased toward the Palestinians, and prefers to deal directly with the United States.

The government has progressively distanced itself from the road map, which calls for a negotiated settlement with the Palestinians, since it signed on to the plan a year ago.

Sharon has refused to talk with the Palestinians as he prepares the Gaza pullout. Instead, he has asked Egypt, which borders Gaza, to help retrain Palestinian security forces and to ensure calm.