The brittle ceasefire in the Middle East has been endangered by a gun battle in the Gaza Strip.
Palestinian witnesses say Israeli soldiers fired rockets on a group of Palestinians at the Rafah refugee camp.
Israeli officials say the Palestinians had opened fire on the army with anti-tank grenades during a routine patrol to repair a fence.
Palestinian gunmen took up positions and started firing back.
Ten Palestinians have been injured, two of them seriously, hospital officials said. One Israeli soldier was lightly injured.
Witnesses said the Palestinians had gathered to watch as they started erecting concrete blocks near the border with Egypt.
Israeli Prime Minister Ariel Sharon has told his party's MPs the army has a free hand in defending Israelis and vowed that Israel wouldn't resume peace talks "until there is total quiet, the cessation of violence, including the cessation of incitement".
Earlier today, Israeli warplanes flew over Lebanon again today, breaking the sound barrier over Beirut, one day after the Lebanese army opened fire on intruding Israeli planes.
Two planes flew at medium altitude over southern Lebanon before going over Beirut.
Yesterday, the Lebanese army fired anti-aircraft batteries on intruding Israeli aircraft for the first time since Israel ended its 22-year occupation of southern Lebanon in May 2000.
PA