An Israeli soldier and two Palestinian militants were killed Friday in a Palestinian attack and a retaliatory air strike, sources on both sides said.
"An Israeli soldier... was killed earlier this morning," an army statement said.
"A terrorist who was identified infiltrating Israel from the southern Gaza Strip opened fire at Israeli soldiers, who responded with fire. During the exchange of fire, the terrorist was killed," it said.
Sources in the radical Islamic Jihad group identified the Palestinian killed as member Ahmed Nasser, 20.
But while the movement's military wing Al-Quds Brigades "congratulated the heroic operation," it said the movement had "no connection to the action."
The father of Ahmed Nasser, bearing the same name, told AFP his son was a member of the radical Islamist group.
"I'm very proud of Ahmed's heroic operation," said the farmer, also a supporter of Islamic Jihad. "Ahmed had hoped to carry out such an operation, or kidnap Israeli soldiers. He spoke about it several times."
"I'm sad to have lost a son, but happy he's a martyr," he added.
The Israeli soldier was named as Nitnel Moshiashvili, 21, of the southern city Ashkelon.
Signup to our newsletter and follow us on Facebook and Twitter!
Following the incident, Israeli aircraft and tanks fired warning shots into Gaza. Palestinian sources said the shelling, east of Khan Yunis, resulted in the burning of a three-hectare (7.4-acre) wheat field.
Late on Friday morning, Palestinians fired two rockets from Gaza into Israel, a military spokeswoman told AFP. There were no reports of casualties or damage.
And on Friday afternoon, three Palestinians were wounded in an Israeli air raid.
"Israeli aircraft targeted a terrorist squad that fired a rocket at Israeli soldiers. A hit was confirmed," a statement said.
Medical sources in Gaza said the attack targeted Palestinians on a motorcycle east of Khan Yunis, seriously wounding three members of the Popular Resistance Committees.
One of the wounded died of his wounds later Friday, the same sources said.
Witnesses said that following the exchange of fire, Israeli soldiers backed by tanks entered Palestinian territory east of Khan Yunis and captured one person, and then retreated. The Israeli army could not confirm the report.
The tense security situation in Gaza caused Ismail Haniya, head of the Hamas government in Gaza, to cancel the public delivery of the weekly sermon following Friday prayers, his office said.
The Israeli military maintains an exclusion zone just inside the Gaza border that it has declared off-limits to Palestinians, and troops frequently carry out military activity in the area.
Last week, an army officer and a soldier were wounded in an exchange of fire with Palestinian militants across the border.