Israel said it had struck a command centre for Hamas fighters who it said had infiltrated the designated "humanitarian" area in al-Mawasi, a vast camp on sandy soil where the military has told hundreds of thousands of Palestinians to shelter since ordering them out of their homes.
Hamas denied any fighters were present.
The Gaza civil emergency service said it believed at least 65 people had been killed or wounded in Tuesday's strikes, but could not provide a breakdown of casualties because many people had been buried and were still missing under the sand.
Israel disputed the casualty figures.
Israel said it struck a command centre for Hamas fighters who had infiltrated a safe zone. (EPA PHOTO)
Rescuers dug with shovels through the night, searching for bodies and survivors buried where the strike had blasted a crater the size of a small football pitch.
Tents in the surrounding area had been incinerated, leaving only metal frames dusted with ghostly ash in a wasteland littered with debris.
A car had been completely buried, only its top visible beneath the sand.
In the morning, mourners at a nearby hospital wailed over bodies heaped in white plastic bags or wrapped in bloodstained shrouds.
The Hamas-run Gaza government media office put the number of fatalities at more than 40.
It said that at least 60 others were wounded in the strikes and many remained missing.
The Gaza health ministry, which compiles casualty figures, said hospitals had received 19 bodies, with other victims under sand and on roads that rescuers could not reach.
Residents and medics said the camp was struck by five or six missiles or bombs.
The Gaza Civil Emergency Service said the estimated 65 victims included women and children but did not immediately provide a breakdown of deaths and injuries.
"Our teams are still moving out martyrs and wounded from the targeted area. It looks like a new Israeli massacre," a Gaza civil emergency official said.
Israel and Hamas blame each other for a failure to reach a ceasefire in Gaza. (EPA PHOTO)
The Israeli military said on Tuesday it struck senior Hamas commanders who were operating in a command centre embedded inside a designated humanitarian area.
"These terrorists were directly involved in the execution of the October 7 massacre and have been recently operating to carry out terror activities," it said.
The military said the casualty figure published by Hamas-run authorities in Gaza "do not align with the information held by the IDF, the precise munitions used, and the accuracy of the strike".
The war was triggered on October 7 when Hamas attacked Israel, killing 1200 people and taking about 250 hostages, according to Israeli tallies.
Israel's subsequent assault on Gaza has killed more than 40,900 Palestinians, according to the enclave's health ministry.
The warring sides each blame the other for a failure to reach a ceasefire that would end the fighting and see the release of hostages.
Hamas, the Islamist group that controlled Gaza before the conflict, denied Israeli allegations that gunmen were present in the targeted area, and rejected accusations it exploited civilian areas for military purposes.
"This is a clear lie that aims to justify these ugly crimes. The resistance has denied several times that any of its members exist within civilian gatherings or use these places for military purposes," Hamas said in a statement.
Ambulances raced between the tent camp and a nearby hospital, while Israeli jets could still be heard overhead, residents said.
Nearly all of Gaza's 2.3 million people have been forced from their homes at least once, and some have had to flee as many as 10 times.
