Palestinian health officials said at least 50 Palestinians were killed when Israeli air strikes hit a densely populated refugee camp in north Gaza on Tuesday, as Israeli ground forces battled Hamas gunmen based in a sprawling tunnel network.

Israeli military spokesperson Lieutenant Colonel Richard Hecht, speaking to CNN, confirmed the Israeli strike on Jabalia refugee camp and said it targeted "a very senior Hamas commander in that area". He added: "We're looking into it and we'll be coming out with more data as we learn what happened there."

Officials at Gaza's Indonesian Hospital said more than 50 Palestinians had been killed and 150 wounded when tons of aerial explosives struck residential dwellings in the heart of the Jabalia camp in urbanised north Gaza.

The Israel military has accused Hamas, which rules the narrow coastal territory, of using civilian buildings as cover for fighters, commanders and weaponry, accusations it denies.

Footage showed a swathe of destruction, with deep bomb craters and gutted, multi-storey cement dwellings as people dug through mounds of rubble with their hands in search of loved ones, dead or alive.

Medics lay the dead swaddled in white cloth in a long line outside the hospital, located in the adjacent town of Beit Lahiya, as the injured including wailing children were rushed inside for treatment amid scenes of pandemonium.

A Hamas statement said there were 400 dead and injured in Jabalia, which lies on Gaza City's outskirts within the main northern ground zone of combat between dug-in Hamas militants and Israeli troops and tanks. Jabalia houses families of refugees from wars with Israel dating back to 1948. (Reuters)