GAZA, Dec 17: The Israeli army raided southern Gaza on Friday, killing at least eight Palestinians and prompting hundreds to flee their homes.

At least five other Palestinians were trapped in an arms-smuggling tunnel that collapsed as it was being dug under an army-controlled security strip between the Gaza town of Rafah and nearby Egypt.

Palestinian ambulances and rescue crews given clearance by Israeli forces rushed to the scene. Palestinian medics said they had "established communication" with the trapped men but still could not reach them.

Israeli troops have raided Rafah many times to battle militants waging a four-year-old uprising, killing hundreds of Palestinians and leaving thousands homeless from demolitions of homes suspected of hiding tunnels.

At least eight Palestinians were killed and 30 wounded in Friday's army raid into Khan Younis, Gaza's second largest city and a hotbed of militants who frequently pepper nearby Jewish settlements with mortar and rocket fire.

Two Palestinians were killed by an Israeli missile strike. Six of the Palestinians killed on Friday were militants and at least two were civilian bystanders, local medics and witnesses said.

The incursion unfolded hours after Israeli Prime Minister Ariel Sharon told a high-profile security conference that there was a unique chance for Middle East peacemaking with new Palestinian leaders following the death of Yasser Arafat.

Mr Sharon said he was ready to coordinate a planned pullout from Gaza with a moderate post-Arafat leader, likely to be Mahmoud Abbas. About 600 people, many carrying small children in freezing pre-dawn darkness, fled homes in neighbourhoods bearing the brunt of the raid and were given shelter in a UN-run school. -Reuters