The fighting erupted when troops surrounded the home of a top bomb maker from the Islamic militant group Hamas, reports CBS News Correspondent Robert Berger. Hamas claimed responsibility for a suicide bombing two days ago in Tel Aviv that killed three Israelis. Israel said its troops came under fire.
The gun battle came as Israeli and Palestinian leaders voiced conflicting interpretations of the long-awaited "road map" peace plan, the latest attempt by international mediators to end more than 31 months of violence.
Diplomats representing the so-called Quartet of Mideast mediators — the United States, European Union, United Nations and Russia — presented the peace plan to Israeli and Palestinian leaders on Wednesday after Mahmoud Abbas took office as the first Palestinian prime minister.
The target of the raid was the home of Yousef Abu Hein, a top Hamas fugitive, in the Shijaiyah neighborhood in Gaza City. The Israeli military said seven soldiers were wounded.
The incursion came a day after Hamas and another Palestinian group claimed responsibility for a suicide bombing in a Tel Aviv pub. The blast killed three bystanders and wounded 55 others. However it was not clear whether the Israeli incursion was in response to the bombing.
The "road map" is supported by a rare global consensus that neither of the warring sides wants to rebuff. Also, it comes at a time when U.S. clout in the Middle East is at a high point in the wake of Saddam Hussein's ouster in Iraq.
"For the first time in a very long time, Israel and the international community have a partner to go back to the table with," U.N. envoy Terje Roed-Larsen told The Associated Press after meeting Abbas. "We have, hopefully, a peace process going."
The two sides started the process at odds. Israeli Prime Minister Ariel Sharon's office issued a statement saying he had received the document "for the purpose of formulating comments on the wording." Palestinian Foreign Minister Nabil Shaath, in contrast, called for "implementing the road map immediately."
Acting U.S. consul-general Jeff Feltman said "the road map is a guideline, it's not a sacred text or treaty." Larsen also said implementation would be negotiated, and a diplomatic source said the United States might dispatch an envoy for the task.
The three-year outline starts with a Palestinian crackdown on terror groups and an Israeli freeze on Jewish settlements in the West Bank and Gaza Strip, combined with a "progressive" Israeli pullout from the autonomous Palestinian zones its troops have reoccupied during the current round of fighting.
A second phase, which could begin as early as the end of the year, would see the creation of a Palestinian state with provisional borders. Tough issues like final borders, the conflicting claims to Jerusalem and the fate of millions of Palestinian refugees and their descendants are left for the last phase.
Palestinian historian Albert Aghazarian was skeptical. "I don't see a road," he said. "I don't see a vehicle. This is all nonsense. I hope I'm wrong."
Both governments say they want to end violence that since September 2000 has resulted in the deaths of 2,287 people on the Palestinian side and 763 people on the Israeli side. But past plans have failed.
Israel's most important objection is to the implication that it must carry out its part at the same time as the expected Palestinian crackdown on militants, instead of posing an end to all violence as a condition for Israeli steps.
"We view the road map as a sequential rather than a parallel activity," said Israeli Foreign Ministry official Mark Sofer. "First and foremost, the terrorism and the incitement to terrorism has to cease. The dismantling of the terrorist organizations has to be put in place immediately."
Abbas suggested in a speech to lawmakers Tuesday that he would do this, pledging to collect illegally held weapons, and condemning terrorism "in all its forms."
But it's a monumental task for his battered Palestinian Authority — and the militants' determination to fight on was underscored by Wednesday's suicide bombing hours before Abbas was sworn in.
Israel and the United States have welcomed Abbas — the most senior Palestinian figure to have criticized the armed uprising against Israel — and they plainly view him as a means to sideline longtime Palestinian leader Yasser Arafat, whom they accuse of encouraging and aiding terrorism.
But Abbas' political support is brittle, and the still-popular Arafat retains considerable influence as well as direct control of some of the Palestinian Authority's security organs — a violation of the road map's calls for bringing all security bodies under the control of Abbas' interior ministry.
Reflecting Abbas' troubles, the Tel Aviv attack was claimed jointly by Hamas and the Al Aqsa Martyrs Brigades, linked to his own Fatah movement but splintered into rogue gangs. A group spokesman said the bombing was a message that "nobody can disarm the resistance movements without a political solution."