An Israeli military spokeswoman said she was looking into information on the incident at al-Fakhora school in Jabalya refugee camp.

People cut down by shrapnel lay in pools of blood on the street. Witnesses said two Israeli tank shells exploded outside the school, killing at least 40 civilians - Palestinians who had taken refuge there and residents of nearby buildings.

In a separate attack earlier in the day, three Palestinians were killed in an airstrike on another school run by the United Nations Relief and Works Agency.

The deaths raised to 75 the number of Palestinian civilians killed yesterday alone, according to medical officials.

They said four militants also were killed in fighting during the day and put the total Palestinian death toll since Israel began the offensive on Dec 19 at 629.

More than 2,700 Palestinians have been wounded since Israel began the campaign with the declared aim of ending Hamas rocket attacks on its southern towns. Nine Israelis, including three civilians hit by rocket fire, have been killed in the conflict.

At least five rockets fired from the Gaza Strip landed in Israel yesterday, including one that hit the town of Gadera, 28 km from Tel Aviv, police said. A three-year-old girl was wounded.

International mediation

International efforts already under way to end the fighting have focused on securing a ceasefire deal that would meet an Israeli demand to ensure Hamas, an Islamist group in charge of the Gaza Strip, could not rearm once hostilities end.

"That is the make-or-break issue," Mark Regev, a spokesman for Israeli Prime Minister Ehud Olmert, said about ensuring an end to weapons smuggling along the Gaza-Egypt frontier by Hamas.

A senior Israeli official said French President Nicolas Sarkozy, on a Middle East visit and in partnership with Egypt, was pursuing "a serious initiative" for a ceasefire in Israel's 11-day-old operation and Hamas rocket strikes.

Talks were focusing, the official said, on the size of an "international presence" along the blockaded Gaza-Egypt border, where rockets and other weapons have reached Hamas through a network of tunnels.

Tony Blair, the Middle East envoy of major powers sponsoring Israeli-Palestinian peace talks, said Sarkozy, the European Union and the United States were all in agreement that new anti-smuggling measures would be needed to clinch a ceasefire.

"What is being talked about is a credible plan to stop the smuggling," Blair, a former British prime minister, told reporters in Jerusalem.

He said he hoped the plan could be completed quickly and that enhanced Israeli security would lead to "a significant advance in opening up Gaza to the outside world".

In Damascus, Sarkozy, who met Olmert and Palestinian President Mahmoud Abbas on Monday, said after talks with President Bashar al-Assad he had no doubt the Syrian leader "will throw all his weight to convince every one to return to reason".

Syria is one of the main backers of Hamas, an Islamist group that seized the Gaza Strip from Abbas's Fatah group in fighting in 2007.

Hamas, which has rebuffed Western demands to recognize Israel, end violence and accept existing interim peace deals, has demanded a lifting of the blockade of the Gaza Strip in any future ceasefire.

Southern Gaza battlefield

Palestinian witnesses said Israeli forces pushed into Khan Younis in southern Gaza as the army widened the ground assault it launched four days ago against Hamas militants after a week of air strikes failed to stamp out cross-border rocket fire.

In a "friendly fire" incident, an Israeli tank shell killed three Israeli soldiers and wounded 24 other troops on Monday. An Israeli officer was killed in a separate incident, apparently also by Israeli fire, the army said.