Two Palestinians were wounded on Wednesday when Israeli navy vessels destroyed two Gaza-bound boats smuggling cigarettes and tobacco from Egypt, Palestinian and Israeli sources said.
Palestinian witnesses and medical sources said the navy opened fire at the vessels as they were heading towards Rafah, moderately wounding two people, while the rest of the crew managed to escape.
An Israeli military spokeswoman confirmed the incident, saying a naval vessel had been damaged by Palestinian gunfire in the exchange.
She said naval forces had identified two Palestinian vessels trying to reach southern Gaza from Egyptian territorial waters in a "suspected smuggling attempt".
Troops had called on the boats to stop and fired warning shots, but the appeal was ignored.
"After the vessels failed to comply the soldiers fired toward the vessels. Hits were confirmed, and secondary explosions were heard," she said.
At the same time, gunmen in Gaza began firing at the naval forces, damaging the navy boat.
"The soldiers responded by opening fire toward the terrorist position."
Israel imposed a land and maritime blockade on the coastal strip in 2006, under which Gaza vessels are not allowed to enter waters more than six nautical miles from the shore.
And Egypt has severely restricted access to the Palestinian territory, ostensibly for security reasons, with its military destroying 1,370 smuggling tunnels under its border with the Gaza Strip, as ties with Muslim Brotherhood-affiliated Hamas have soured.