Four people were seriously wounded, including a 1-year-old girl, hospital officials said.
The car was parking in front of the house of a well-known Hamas militant in the Shajaiyeh neighborhood in eastern Gaza City, near the border with Israel, when the missile wrecked the car, Hamas officials said. They identified the dead as Abdel Khader Habib, a field commander, and his bodyguard. A third person escaped from the vehicle, they said.
The Israeli military said it targeted a vehicle in Gaza city carrying "terrorist activists."
In a text message to The Associated Press, Hamas spokesman Abu Obeideh threatened revenge for "all Israeli crimes" and said Hamas operations would continue "until our goals are achieved." Hamas does not accept the existence of a Jewish state in the Middle East.
Israel has been targeting Gaza militants in airstrikes as part of its so far unsuccessful campaign to stop daily rocket barrages from Gaza aimed at Israeli towns and villages just outside the territory.