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A Sderot resident was moderately wounded when a Qassam rocket slammed into the western Negev city on Sunday morning. The man suffered shrapnel wounds to his chest and was rushed to Barzilai Medical Center in Ashkelon.

A second rocket hit a Sderot house, causing damage.

Magen David Adom paramedics were treating three people for shock.

On Saturday evening, a six-year-old Palestinian girl, her elder brother and her mother were killed in an explosion in a house east of Gaza City, medical sources said.

The explosion occurred in the neighborhood of Sajaiyeh, near the Karni border crossing on Gaza's eastern border with Israel.

The Israel Defense Forces denied responsibility for the fatalities, but confirmed that it launched an air strike in the area, claiming it was aiming for a group of armed gunmen.

Just after midnight Sunday, the Israel Air Force attacked a group of armed militants near the Karni commercial crossing, wounding three, Palestinian security sources said

Palestinian witnesses said Israel Defense Forces tanks began moving back into an abandoned Israeli settlement in northern Gaza early Sunday, a day after pulling back.

Witnesses said tanks crossed the border into the ruins of Dugit, a settlement on the coast, destroyed as part of Israel's pullout from Gaza last summer.

The IDF said there were no Israeli forces in any part of the northern Gaza Strip.

IDF forces withdrew Saturday from northern Gaza after an intensive two-day operation aimed at creating a buffer zone to stop Palestinian militants from firing rockets at Israel.

The IDF expanded its operation in Gaza on Saturday morning, with tanks advancing to within 500 meters of Gaza City. Some 15 tanks entered the Strip through the Karni border crossing in what the army said was a search for tunnels used by militants.

The armor corps and troops from the Givati infantry brigade reached Sajaiyeh and engaged in fierce fighting with local militants.

The IAF fired missiles at a group of militants gathered at the outskirts of Sajaiyeh. Three Hamas gunmen were killed in one of the attacks by tanks shells, Israel Radio reported.

Late Saturday afternoon, IDF troops withdrew from positions overlooking the northern Gaza town of Beit Hanun.

Throughout Saturday, IDF units were active east of Gaza City in the area lying between Karni Crossing and the eastern neighborhoods of the city in addition to the Sufa Checkpoint in southern Gaza.

As of Saturday evening, troops withdrew their positions near Sufa. In addition, a small contingent of IDF troops continues to operate in the Dahaniya airport region in southern Gaza.

Military sources told Haaretz that incursions into the Gaza Strip will be expanded in the coming days.

Reuters reported that IDF soldiers have pulled out of the northern Gaza towns of Beit Lahia and Beit Hanun, the Erez industrial zone as well as three former Israeli settlements.

Israel had seized the area earlier this week, creating what amounted to a buffer zone to try to make it harder for Hamas militants to fire rockets into Ashkelon, and other population centers near the Gaza Strip.

Rocket fire has not stopped, however. "We are acting at our own discretion and we do not rule out a return to these areas," an IDF spokesman said. "The operation is not over."

A Palestinian policeman was killed Saturday in a separate attack. An IDF spokesman said forces exchanged heavy fire with militants in the area but he was unaware of any policeman being hit. Another Palestinian died of wounds sustained in earlier fighting Saturday/

At noon Saturday, about 250 Palestinians conducted a funeral procession in downtown Gaza City for two Hamas militants killed earlier in the day in fighting with IDF forces.

The IAF attacked a tunnel dug near the Karni crossing in the northeastern Gaza Strip on Saturday morning. The air strike hit the entry to the tunnel on the Palestinian side of the border, which was covered by a henhouse.

The IDF said that the tunnel was used by Hamas to smuggle arms and to enable militants to carry out terror attacks in Israel proper.

Israel Navy ships were shelling Qassam launch pads in northern Gaza Strip, the radio said. Tanks also blocked an east-west road south of Gaza City.

In northern Gaza, troops pulled back from the town of Beit Lahia after two days of fierce gun battles.

Meanwhile, an IAF aircraft overnight Saturday fired a number of missiles at targets in Gaza, Palestinian sources said. A gunman was seriously wounded in one of the attacks, according to Israel Radio.

The IDF's latest initiative came in response to a barrage of Qassam rockets fired at the Negev on Friday in which three people were lightly injured and several others suffered from shock. The three suffered shrapnel wounds and were taken to Barzilai Medical Center in Ashkelon.

A Qassam rocket landed in an open area near Sderot on Saturday morning, Israel Radio reported. There were no casualties or damage, the radio said.

At least 15 Qassam rockets were fired into Israel from the Gaza Strip on Friday. Most of the rockets landed in the Sderot area, one landed south of Ashkelon, and one landed half a kilometer from the town of Netivot, also in the western Negev. The range of the rocket that landed near Netivot appears to be more than 10 kilometers. This was the first incidence of Qassam fire in the Netivot area.

Three Sderot residents were lightly injured from shrapnel and four people went into shock.

One of the rockets that landed in Sderot narrowly missed a school building in the city, and wounded three people. Another rocket hit a factory in a nearby town, and started a fire. Two more rockets landed in a cemetery, causing another fire. Two rockets landed in open fields.

"The very fact that one of the rockets nearly struck a school in Sderot, which could have caused a major tragedy, proves the importance of the Israeli army's mission in the Gaza Strip, which is geared to preventing such lethal attacks on our own citizens, in the hearts of our own cities," David Baker, an official in the Prime Minister's Office, said Friday.

Halutz: 'Militants have paid a high price'The Israel Defense Forces has killed about 40 Palestinian militants in the Gaza Strip in an effort to show the Palestinians there is a high price to pay for firing rockets and kidnapping an Israeli soldier, IDF Chief of Staff Dan Halutz told troops during a visit to an army base near Gaza on Friday.

"The terrorists have paid a high price until now," he said as Israeli air strikes and shelling and Palestinian rocket fire continued Friday. "We will continue to operate to the extent necessary."

IDF First Lt. Yehuda Bassel was killed Thursday, on the first day of Israel's incursion into the northern Gaza Strip.

Halutz said the IDF would not commit to winding up the northern Gaza campaign within a set amount of time, but would make that decision based on circumstances.

The Israel Air Force renewed air strikes at armed Palestinians in northern Gaza on Friday morning, hours after the heaviest day of fighting in the Gaza Strip in the past four years.

The clashes are part of an IDF operation aimed at securing the release of Corporal Gilad Shalit, who was abducted by Palestinians on June 25, and putting a halt to Palestinian rocket attacks on the Negev.

The State Department expressed concern Friday with the loss of life in the operation and urged the Israeli government to make sure innocent civilians were not hurt and the Palestinians' day-to-day lives were not impaired.

At the same time, the department called for the immediate and unconditional release of Shalit, and said the hostage-taking by Hamas "continues to place innocent Palestinians in harm's way."

"There is no question that Israel has a right to defend itself and the lives of its citizens," said spokeswoman Julie Reside. "But we also urge the Israeli government to ensure that innocent civilians are not harmed, to exercise restraint and to refrain from adversely affecting the Palestinian humanitarian situation."

"We are concerned about the reports of violence and the loss of innocent life," Reside said.

On Friday afternoon, two militants were killed in an IAF strike on the northern Gaza Strip town of Beit Lahia, and a third in an airstrike on Jabalya.

Earlier Friday, an air strike killed one Palestinian and wounded three others in the northern Gaza Strip, witnesses said. The IDF said an aircraft had opened fire on a group of gunmen. Troops were also shelling Qassam-launching sites in northern Gaza on Friday, Israel Radio reported.

Defense Minister Amir Peretz told soldiers at the Gaza front Friday that they were carrying out a "national mission," Israel Radio reported. Regarding the risk to Palestinian civilians, Peretz said that while the IDF adheres to an ethical code, Palestinians are continuing to attack from within population centers.

IDF officials: Gaza raid won't halt rocket fireThe Israel Defense Forces operation in the northern Gaza Strip may diminish Palestinian rocket fire, but it will not halt it altogether, senior military officials told Haaretz as air strikes and rocket fire continued Friday.

The officials said the IDF plans to carry out numerous raids on the outskirts of built-up areas in an effort to deter rocket-launching cells.

The Gaza operation "doesn't mean there won't be Qassam fire if we leave tomorrow or the day after," said Halutz. "But it does mean that terror organizations will pay a high price for every Qassam fired."

The commander of the Gaza Division, Brigadier General Aviv Kochavi, said Friday that the IDF will not take control of all the Qassam-launching sites in Gaza and that the operation's key targets are terrorists and the terror infrastructure.