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An Israeli soldier and a gunman from the Gaza Strip were killed in a rare border clash on Friday, the army said in a statement.
It said the gunman, who was not immediately identified, crossed the fortified boundary into Israel from the Palestinian enclave and opened fire on troops, who shot back.
Palestinian witnesses heard an explosion and shooting near Abassan, a border village in southern Gaza that is also close to the Egyptian frontier. They said Israeli forces set off smoke bombs to obscure the view as helicopters circled.
Gaza's Islamist Hamas rulers and other militants are hostile to the Jewish state, and the enclave saw a surge in cross-border fighting in March. But violence had otherwise abated as rival Palestinian factions negotiate power-sharing deals and monitor political developments in Egypt.
There was no immediate claim of responsibility for the cross-border raid, but the Israeli army blamed Hamas.
"The Hamas terror organization is solely responsible for any terrorist activity emanating from the Gaza Strip," it said.