Soldiers took over the rooftops of several homes and detained about 60 people in house-to-house raids, residents said.The Israeli military said they were detained for questioning.
The gunfire kept frightened motorists away from the main road between the towns of Khan Younis and Rafah, which was blocked at one section by an Israeli tank. Troops also were demolishing a gas station on the road.
The operation took place about one kilometer deep inside southern Gaza. The military described it as a routine operation "against the terror infrastructure." Militants in Gaza routinely fire crude rockets and mortars at Israeli border communities, and smuggle in weapons from Egypt.
In related news, Israel carried out two airstrikes early Tuesday against armed Palestinians who approached troops in northern Gaza, in the area of Beit Hanoun, the military said. The military said it identified two hits in the two separate assaults.
Hamas said it attacked two groups of soldiers in northern Gaza , but reported no casualties.
The Islamic Jihad militant group said one member was killed and three others were wounded in an Israeli ground attack on a rocket-launching squad.
The violence came a day after Israeli Prime Minister Ehud Olmert pledged to "forge a historic path" toward a final accord with the Palestinians in the first formal peace talks in seven years, warning that if Israel tries to maintain control over Palestinian territories, its future as a Jewish state is in jeopardy.
The talks are set to open Wednesday. The chief negotiators, Israeli Foreign Minister Tzipi Livni and former Palestinian Prime Minister Ahmed Qureia, met on Monday to finalize arrangements for the launch of talks, which were set in motion last month at a U.S.-sponsored conference.
Olmert told a business conference on Monday that the stakes are high for Israel . Answering hard-line critics who reject concessions to the Palestinians, Olmert said creation of a Palestinian state next to Israel is vital.
"The destruction of the two-state model, and international backing for the idea of one state for all residents with equal rights to vote, threatens the existence of the state of Israel" as a Jewish state, he said.
"I intend to take advantage of this opportunity to wage serious, ongoing and uninterrupted negotiations in order to forge a historic path toward a new diplomatic reality," he added.
About equal numbers of Jews and Arabs now live in Israel, the West Bank and Gaza, but only Israeli citizens vote in Israeli elections. Arabs make up about 20 percent of Israel's citizens. Israel captured the West Bank and Gaza Strip in the 1967 war but has not annexed the territories or extended Israeli citizenship to Palestinians there.
Leading the charge against concessions are Jewish settlers and their hawkish backers, declaring that the West Bank is part of biblical Israel , and that Palestinian control would pose a threat to Israel's security.
Olmert himself said he questions whether a peace accord could be implemented. He said the Palestinian government is too weak to impose law and order in its territories, though previous accords require it to disarm militants and halt attacks against Israelis.
"They still do not have the firm infrastructure of a state, with all the accompanying institutions and law enforcement authorities needed for its establishment," Olmert said. "However, there is a leadership which declares its desire to make peace with us."
Palestinian President Mahmoud Abbas controls only the West Bank after the Islamic militant Hamas overran Gaza in June, expelling pro-Abbas forces.
Palestinians have their own doubts about Israel 's intentions. This week's spat over Israel's plans to build 307 new housing units in a Jewish neighborhood in the section of Jerusalem Israel captured in the 1967 war is an indication.
The announcement set off protests from Washington as well as from the Palestinians, who claim that section of Jerusalem as the capital of the state they hope to create.
Israel has built a ring of Jewish neighborhoods on the captured land, and about 180,000 Israelis live there.