Palestinian security officials said that a Palestinian gunman had been killed during the skirmish with the Israeli troops Wednesday in an area where militants frequently fired rockets toward Israel.
The Israeli army confirmed the clash, saying troops hit at least two gunmen, but did not know their condition.
Soldiers entered Gaza after seeing three militants plant a bomb near the fence separating Israel from the Gaza Strip, the army said. Troops opened fire at the gunmen, hitting at least two, and the militants detonated two explosives in the exchange, the army said.
Palestinian security officials said troops entered the northern Gaza Strip and killed one Palestinian gunman, injured another, and arrested a third. It was not immediately clear to which militant group the three men belonged.
The Israeli army initially prevented Palestinian ambulances from reaching the scene to evacuate the wounded, the Palestinian officials said, speaking on condition of anonymity because they were not authorized to release details of the incident to the press. Two farmers were wounded in the exchange, they said.
The exchange of fire occurred in the area of Beit Hanoun, where militants from the radical Islamic Jihad frequently shoot rockets toward Israel. Though Israel has been observing a cease-fire with Palestinian militants in Gaza since November, Islamic Jihad has refused to join the truce.