It came only hours before the UN Security Council was scheduled to debate a draft resolution by Arab member states, calling for an immediate end to the Israeli offensive and for the protection of civilians.

Gaza emergency services chief Mo'aweya Hassanein told reporters that more than 150 were injured in the strike just outside the al- Fakhoura school in the Jabaliya refugee camp, north of Gaza City.

Hundreds of civilians had been taking shelter from nearby fighting in the camp's boys elementary school, run by the UN's agency for Palestinian refugees (UNWRA).

The UN said three Israeli artillery shells fell next to the school. The Israeli military said it was checking the reports.

Witnesses said the school was hit shortly after local militants fired mortar shells from near the school at the Israeli tanks.

Most of those killed had been outside at the time the projectile struck, but people inside were also injured by shrapnel.

Local Palestinian television showed bloodstains and shoes and slippers scattered on the ground. Severely injured Palestinians could also be seen being carried into Palestinian ambulances.

UNRWA staff said the school was waving a blue UN flag and that the agency had passed the GPS coordinates to Israel of its schools and shelters in Gaza.

More schools under fire

Even so, four UNWRA schools had been caught in the crossfire over the past days. Another UNWRA school in Gaza City sheltering some 400 civilians was hit just overnight, with three Palestinians killed as they used flashlights to go to the toilet.

Hassanein said the death toll in the Gaza Strip since the beginning of the Israeli air and ground offensive on December 27 now topped 630, while over 2,600 have been wounded. At least a quarter of the dead are civilians, according to UN staff on the ground.

More than 80 Palestinians were killed Tuesday since midnight, including at least 12 members of the same family, al-Daia, when Israel shelled or rocketed their house their house in southern Gaza City's Zaytoun neighborhood.

Reports state Israeli troops have surrounded Gaza City

Israeli ground troops, who entered Gaza on Saturday after a week of relentless airstrikes, have encircled Gaza City -- which faces the Mediterranean on the west -- from the south, east and north.

In addition to the outskirts of Jabaliya, a crowded camp considered the hub of Palestinian rocket-launching squads, they are also on the outskirts of Khan Younis in the south.

A Palestinian militant leader denied reports that the ground troops had advanced into populated areas, saying they were still occupying largely open areas.

But residents said local militants confronting those ground troops have been launching anti-tank missiles and mortar shells at them from behind and from the roofs of nearby civilian buildings.

When Israeli fighter jets or helicopter gunships then locate the source of the fire and strike back, the militants have run away and civilians are killed in their stead, they said.

Hamas' armed wing, the Qassam Brigades, confirmed in a statement sent to journalists that its militants were confronting the Israeli soldiers with anti-tank missiles and mortar shells, as well as roadside bombs, and "face to face" exchanges of fire.

Six Israeli soldiers have been killed since the ground fighting started Saturday, three of them late Monday when an Israeli tank erroneously shelled a house on the outskirts of Jabaliya, in which the troops had taken cover. Another 24 Israeli soldiers were injured.

Mission to arrest militants and destroy infratructure: Israel

An Israeli military spokesman said the purpose of the ground invasion was to arrest and question Hamas fighters, find and destroy Hamas "infrastructure" -- rocket storage sites -- and hold territory from where militants have been launching rockets into Israel.

Soldiers have already detained and questioned dozens of suspected militants, the military spokesman said.

Hamas nevertheless has for the time being succeeded in launching more rockets into Israel, firing more than 40 Monday and at least another 27 Tuesday by the late afternoon.

The Israeli town of Gedera, over 40 kilometers from the most northern tip of Gaza, was hit for the first time, where a three-month- old baby was slightly injured.

As it continued its ground offensive, Israel also kept up its airstrikes, attacking another 50 targets Tuesday, the military said, including more smuggling tunnels, rocket storage depots and the Saraya security headquarters in downtown Gaza City.

A defiant Israeli caretaker Prime Minister Ehud Olmert Tuesday told an EU delegation - in Israel to push for an end to hostilities - that the Gaza offensive will continue until Hamas completely stops is rocket attacks, and a mechanism is in place to guarantee that the rocket fire will not resume and that no new weapons are smuggled into Gaza in the future.

Israel will not settle for a temporary solution, he said. Meeting French President Nicolas Sarkozy late Monday, he urged the Security Council, presided over by France this month and scheduled to convene at 2200 GMT on Tuesday, to give Israel "freedom to act" against Hamas and other militants firing rockets from Gaza.

Palestinian President Mahmoud Abbas was to address the council, which is meeting for the second time since Saturday.

Sarkozy, in Damascus later Tuesday, urged Syrian President Bashar al-Assad to use its influence on Hamas to exert pressure on it to end its rocket attacks.