GAZA CITY: At least 10 people were killed Sunday in a fresh strike on a UN school in southern Gaza which was sheltering Palestinians displaced by an Israeli military offensive, medics said.

Gaza emergency services spokesman Ashraf al-Qudra said dozens of people were wounded in the attack which took place in the southern city of Rafah, which straddles the border with Egypt.

Chris Gunness, spokesman for the UN agency for Palestinian refugees (UNRWA), said the school had been housing thousands of internally displaced people (IDPs) who had been forced to flee their homes by the ongoing violence in Gaza.

“Shelling incident in vicinity of UNRWA school in Rafah sheltering almost 3,000 IDP. Initial reports say multiple deaths and injury,” he wrote on his Twitter feed.

Witnesses said the attack happened while people were waiting in line for food supplies.

It was not immediately clear whether the strike was the result of Israeli or Palestinian fire.

The Israeli military had no immediate comment and the UN said it was not immediately clear where the strike originated

It was the third time in 10 days that a UN school had been hit and came four days after Israeli tank shells slammed into a school in the northern town of Jabaliya, killing 16 in an attack furiously denounced by UN chief Ban Ki-moon as “reprehensible”.

Earlier Israel's military had begun redeploying along its border with Gaza after the government signaled it would reassess its operations. A number of tanks and other vehicles were seen leaving Gaza on Sunday.

In a televised address late Saturday, Prime Minister Benjamin Netanyahu suggested troops would reassess the operation after completing the demolition of Hamas military tunnels under the border.

Security officials said the tunnel mission was winding down.

At the same time, Netanyahu warned Hamas would pay an “intolerable price” if it continued to fire rockets at Israel and that all options remain on the table. Israel carried out airstrikes in southern Gaza Sunday even as it signaled it may be scaling back its 27-day-old offensive in Gaza.

Gaza health officials said nine Palestinians were killed in the strike.

On Saturday, the Israeli army gave a first indication it was ending operations in parts of Gaza, while continuing to bombard other areas ahead of fresh truce talks in Cairo.

As a Palestinian delegation flew to Egypt in search of a ceasefire, the Israeli army conveyed a message to residents of part of northern Gaza that it was “safe” to return home.

“They have been informed it is safe for civilians to return to Beit Lahiya and Al-Atatra,” a spokeswoman told AFP, in what was understood to be a confirmation that troops had stopped operating there.

Witnesses in the north confirmed seeing troops leaving the area as others seen leaving another flashpoint area in southern Gaza.

It was the first time troops had been seen pulling back since the start of Israel's devastating 26-day operation, which has so far claimed more than 1,660 Palestinian lives and forced up to a quarter of the territory's population into exile.

The move came after an army spokesman told AFP Israel was “quite close to completing” the destruction of tunnels used for infiltrating southern Israel, the main objective of the ground operation.

Despite the partial withdrawal, Israel's security cabinet decided against sending a delegation to ceasefire talks with the Palestinian delegation in Cairo.

Hunt goes on

Israel said it was focusing its search for Goldin on the outskirts of sprawling Rafah, where some 210,00 Palestinians live.

Israel considers the capture of its soldiers a casus belli.

In 2006, Gaza militants captured conscript Gilad Shalit and held him for five years before freeing him in exchange for more than 1,000 Palestinian prisoners.

Weeks after Shalit's capture, Israel launched a 34-day war on the Hezbollah militia in Lebanon after it seized two soldiers, whose remains were later returned in another swap deal.

US President Barack Obama “unequivocally condemned” Friday's killing of two soldiers and the lieutenant's alleged capture, saying that if those responsible wanted an end to the bloodshed, Goldin would need to be “unconditionally released, as soon as possible”.

Meanwhile, air strikes and tank fire pounding huge areas of Gaza into rubble, killing four members of the same family in the central area of Deir al-Balah and another eight, from two separate families, in Rafah, medics said. Israeli's army also said it intercepted two rockets from Gaza on Saturday.

UN figures show that up to 25 per cent of Gaza's population of 1.8 million may have been forcibly displaced, with more than a quarter of a million now seeking safety in shelters belonging to UNRWA, the UN agency for Palestinian refugees.

Egypt's President Abdel Fattah al-Sisi said Saturday a Cairo truce plan can offer a solution to the spiralling violence.

The Palestinian delegation going to Cairo includes intelligence chief Majid Faraj, senior Hamas official Mussa Abu Marzuq, and Ziad al-Nakhale, a leader of Islamic Jihad.

Ahead of the meeting, Sisi said Egypt's Gaza truce proposal offered a “real chance to find a solution to the crisis” but that it must be implemented quickly to stop the bloodshed.