Israeli troops killed one Palestinian and wounded two in the central Gaza Strip on Saturday, local hospital officials said.
An Israeli military spokeswoman said troops on patrol along the Israeli side of the border fence with the Gaza Strip heard a loud explosion and responded with fire towards "areas suspected as points where terrorists operate."
It was the first deadly incident in the Gaza Strip for over a week. On 8 December an Israeli air strike killed two Palestinian militants in Gaza City who the Israeli military said had planned an attack on Israelis. Gaza militants struck back by firing rockets into Israel, causing no casualties.
Violence between Israel and Gaza militants had slightly abated recently, though tit-for-tat incidents in which militants fire rockets at Israel, which mainly responds with air strikes, have continued a few times a month.
Israel is set to release 550 Palestinian prisoners to the Gaza Strip on Sunday in the second, final phase of a swap in which Israel agreed with Gaza's Hamas rulers to release 1,027 prisoners in exchange for soldier Gilad Shalit, held captive for five years, who was freed in the first phase in October.
Hamas, an Islamist movement, has ruled the blockaded Gaza Strip since 2007, while Palestinian President Mahmoud Abbas's Western-backed Palestinian Authority remains dominant in the occupied West Bank.