Israeli forces on Wednesday battled Hamas militants in Gaza's main southern city, leading to "deepening horror" for civilians, the UN said, after nearly two months of war sparked by deadly attacks on Israel.

Israeli troops, tanks, armoured personnel carriers and bulldozers have rolled into Khan Younis, Gaza's second-largest city, forcing already displaced civilians to flee again, witnesses said.

The military wing of Hamas reported fighting with Israeli forces east of the southern city.

"We are devastated," said local resident Amal Mahdi who survived an overnight Israeli strike on Khan Younis. "We need someone to find us a solution so we can get out of this situation."

Much of northern Gaza has already been reduced to rubble by fierce fighting and bombardment, displacing 1.9 million people according to UN figures.

With Israel now focusing on the south, the streets of Khan Younis were almost empty early on Wednesday as residents sought shelter from shelling and artillery fire, while the dead and wounded continued to pour into the city's hospitals.

Israel declared war on Hamas after the militant group's October 7 attacks that killed 1,200 people, mostly civilians, according to Israeli authorities, and saw around 240 hostages taken.

The latest toll from the Hamas government's media office said 16,248 people in Gaza, most of them women and children, had been killed.

"We, too, want this war to end," Israeli government spokesman Eylon Levy told reporters, "But it can only end in a way that ensures that Hamas can never attack our people again."

Israel has vowed to destroy Hamas and free 138 hostages still held in Gaza after scores were released during a short-lived truce.

But mass casualties in Gaza have sparked global concern, heightened by dire shortages caused by an Israeli siege that has seen only limited supplies of food, water, fuel and medicines enter.

"The entire north of the Gaza Strip is left without health services," said Munir al-Bursh, director of the Hamas-run health ministry.

With mediation efforts seemingly stalled since the collapse of a truce on Friday, the UN human rights chief pleaded for an immediate ceasefire and the release of hostages.

"Palestinians in Gaza are living in utter, deepening horror," Volker Turk told a news conference.

"Civilians in Gaza continue to be relentlessly bombarded by Israel and collectively punished... I call for an urgent cessation of hostilities," he said.

The Israeli army said on Wednesday it had struck about 250 targets in Gaza over the past 24 hours and claimed troops had found a major arms depot "in the heart of a civilian population."

"One of the largest weapons depots in the Gaza Strip was found near a clinic and school" in an undisclosed location in northern Gaza, it said.

"The depot contained hundreds of RPG missiles and launchers of various types, dozens of anti-tank missiles," explosives and drones, the statement added.

Sources in Hamas and Islamic Jihad, another Palestinian militant group, said their fighters were battling Israeli troops early on Wednesday in a bid to prevent them from breaking into Khan Younis.

The Hamas media office said dozens were killed and injured in heavy strikes east of the city.

Many civilians fled to Khan Younis when Israel ordered them to evacuate the north of the densely populated Gaza Strip earlier in the offensive.

Hassan al-Qadi, a Khan Younis resident displaced to Rafah, said "the whole city is suffering from destruction and relentless shelling."

"Many are homeless and some are searching for their missing children," he said.

International aid groups have condemned the succession of orders to flee from one area to another, saying civilians were running out of options.

Israel's army has published a map it said was intended to enable Gazans to "evacuate from specific places for their safety if required." (AFP)