Israeli forces targeted a Palestinian militant cell in the Khan Yunis area of southern Gaza, that was reportedly preparing to launch a mortar attack on a nearby Jewish settlement, a military source said.

“They were aerially targeted and we identified hitting one of them,” the Israeli source said. “It was moments before they were about to fire, they had the launcher in place and the missile was in sight.”

It was Israel’s first air strike since the main Palestinian militant groups agreed on January 21 to observe a de facto truce in anti-Israeli attacks.

Palestinian medical sources said Ahmed Shahwan, a 24-year-old Hamas member from Khan Younis, lost both legs and an arm in the attack. Reports said he later died.

Militant group Hamas branded the Israeli attack a “serious escalation”, but stopped short of declaring an end to the truce.

“The Palestinian people will not keep still in the face of Israeli crimes and aggression,” spokesman Sami Abu Zuhri said.

Abu Zuhri denied Hamas members were involved in the incident, saying the cell consisted of members of another, small Palestinian faction.

Hamas stressed that it reserved the right to respond to what it called “Israeli aggression.”

A Palestinian interior ministry spokesman said three members of the Palestinian security services were wounded after an exchange of fire with militants who were trying to fire mortars at a Jewish settlement.

The shelling was an apparent response by militants to the death of a Hamas gunman near the border with Egypt on Tuesday.

The Israeli army said 20 mortar shells and two Qassam rockets were fired by militants before and after the air strike – first at the settlements of Morag and Neve Dekalim; later at Netzarim and other communities, slightly wounding one person.

Violence has dropped after Israeli Prime Minister Ariel Sharon and Palestinian leader Mahmoud Abbas declared an end to more than four years of violence at a landmark Middle East peace summit in Egypt in February.

However, the Israeli government has repeatedly criticised Mr Abbas for not doing enough to disarm militant groups, while the Palestinians accuse Israel of reneging on agreements made at the summit.