The Israeli military said the car was carrying militants from the Al Aqsa martyrs' Brigades, affiliated with President Mahmoud Abbas' Fatah movement. Witnesses said the men in the car jumped out before the missile hit.
The dead children were a 5-year-old boy, Mohammed Roka, and 7-year-old Samia al-Sharif, officials at Shifa Hospital in Gaza City said. A 16-year-old girl, Bilal Alhassi, died later of her wounds, the hospital said.
The car exploded on a narrow street in the crowded refugee camp. The front of the car was badly damaged, but the back was intact.
Hundreds of angry Palestinians gathered around the vehicle, shouting slogans. Khalil Roka, a cousin of the dead boy, said he was sitting in front of his car repair shop while the children played in front of the house nearby. He said he saw a red flash a the car exploded, and the children were hit, but he didn't see the boy who was killed. "I was carrying my other cousins to the ambulance," he said.
The army said it regretted any civilian casualties caused by the airstrike.
Russian nuclear-powered submarine Orel was left dead in the water off the coast of the Danish island of Sehero