Qatar's emir called for Palestinian unity as he made a landmark visit to the Gaza Strip, the first to the enclave by a head of state since Hamas took over in 2007.
Gaza's Islamist rulers unfurled red carpets and recited poems in honour of Sheikh Hamad bin Khalifa al-Thani as he arrived to inaugurate a multi-million dollar project to rebuild the impoverished territory.
His visit was a diplomatic coup for Hamas, which has been shunned by international dignitaries since it seized the territory in 2007, ousting forces loyal to the western-backed Palestinian Authority of president Mahmud Abbas.
But the Qatari emir urged the rival Palestinian factions Hamas and Abbas' Fatah to reconcile their differences.
"It's about time Palestinians turn over the page of division and open a new chapter for reconciliation and agreement, based on the agreements in Doha and Cairo, with sincere efforts from Palestinian president brother Mahmud Abbas and head of the Hamas political bureau Khaled Meshaal," he said.
Gaza's Hamas prime minister Ismail Haniya hailed the emir's visit as a "victory" over his Islamist government's isolation.
"You are officially declaring the end of the political and economic blockade imposed on the Gaza Strip by the forces of injustice and tyranny," he told the emir.
He was referring to a political boycott as well as an Israeli blockade in place since 2006, which prevents Palestinians from bringing construction materials into the territory.
"Today we demolish the wall of the blockade through this visit, thank you Qatar!" he said.
Thousands of Qatari and Palestinian flags fluttered as the Qatari emir crossed into Gaza from Egypt and was warmly greeted by a large delegation of top Hamas officials led by Haniya and his cabinet.
He visited the Islamic University in Gaza City, where he and his wife Sheikha Moza bint Nasser received honorary doctorates, before leaving for the Rafah crossing to return to Egypt.
Last month, gas-rich Qatar said it would invest $254 million (195 million euros) in rebuilding Gaza, which sustained major damage during a 22-day Israeli military operation that began in late December 2008.
But on opening a Qatari project to build 1,000 homes in the southern city of Khan Yunis, Haniya announced the emir had decided to significantly increase the initial sum.
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"The emir agreed to increase the Qatari investment from $254 million to $400 million," Haniya said as Sheikh Hamad laid the foundation stone for the project named in his honour.
The increased funding would mean an extra 2,000 homes would be built in "Emir Hamad City", and would also go towards a $25 million housing project for prisoners released last year in a landmark swap deal with Israel, he said.
Besides his wife, the emir was accompanied by Qatari Prime Minister Sheikh Hamad bin Jassem al-Thani.
It was the second time the Qatari leader had visited the tiny coastal territory -- his first visit was in 1999 -- and it coincides with a spike in tension between Hamas and Israel.
A Palestinian died in an Israeli air strike on the Gaza Strip early Wednesday, a medic said, bringing to three the number of militants killed in overnight raids on the territory.
The latest air strike, on Rafah in the south, targeted members of the Popular Resistance Committees who were firing rockets into Israel, the medic said, adding that another militant was wounded in the raid.
Two Israeli air strikes on northern Gaza Strip late on Tuesday killed two Palestinians and wounded seven more, said a health ministry spokesman.
A statement from Hamas, which controls Gaza, said those killed were members of its military wing, the Ezzedine al-Qassam Brigades.
An Israeli army spokesman said of the earlier raids that the air force had attacked two groups of Palestinians who were about to fire rockets into southern Israel.
"More than six rockets were fired from the Gaza Strip in three hours," said the spokesman, who later confirmed a third raid said which he said targeted militants preparing to fire rockets into Israel.
The spokesman added that at least 60 rockets have been fired from Gaza since the beginning of the month.
The air raids came after a bomb on Tuesday wounded an Israeli army officer on patrol along the border with the Gaza Strip, in an attack claimed by leftist group the Popular Front for the Liberation of Palestine.
The military said the soldier had been wounded during a routine patrol along the fence in the Kissufim area of Gaza early on Tuesday.