At least 15 people were killed and more than 200 injured when a UN-run school used as a shelter in Gaza came under fire, Gazan health officials say.
Palestinian families were in the school in Beit Hanoun, fleeing Israel’s offensive against Hamas militants.
In the past 16 days of fighting, more than 750 Palestinians and 33 Israelis have been killed, officials say.
Hamas leader Khaled Meshaal told the BBC he wants a ceasefire and end to Israel’s blockade as soon as possible.
“We don’t want to be controlled by a border crossing that makes Gaza the biggest prison in the world,” Mr Meshaal, who lives in exile in Qatar, told BBC Hardtalk.
“People cannot go for medical treatment or to work. Why are the people of Gaza being punished by a slow death in the world biggest prison. This is a crime.”
Israel launched its military offensive on 8 July with the declared objective of stopping Hamas firing rockets from Gaza.
Israeli PM Benjamin Netanyahu said on Thursday he regretted each Palestinian civilian death, but said they were “the responsibility of Hamas”.
UN chief Ban Ki-moon said he was “appalled” by the attack on the school in northern Gaza and said it underscored “the imperative for the killing to stop – and to stop now”.
According to the UN, more than 118,000 people are now sheltering in UN schools and people are running out of food.
Pools of blood
It is the fourth time in as many days that a UN facility has been hit.
Correspondents say pools of blood lay on the ground in the courtyard of the school in Beit Hanoun, and there was a large scorch mark where it appeared a shell had hit.
UN officials said that during the course of the day they had been trying to negotiate a window of time with the Israeli army for civilians to leave the area because of the heavy fighting.
Chris Gunness, a spokesman for the UN Relief and Works Agency for Palestine refugees (Unrwa), also said the Israeli army had been formally given the co-ordinates of the shelter in Beit Hanoun.
The Israel Defense Forces (IDF) said in a statement that it was in the midst of combat “with Hamas terrorists in the area of Beit Hanoun, who are using civilian infrastructure and international symbols as human shields”.
“In the course of the afternoon, several rockets launched by Hamas from within the Gaza Strip landed in the Beit Hanoun area. The IDF is reviewing the incident,” it said.
The UN’s Office for the Coordination of Humanitarian Affairs (Ocha) says a 1.9 mile (3km) wide strip, encompassing 44% of Gaza, has been designated as a no-go zone by the Israeli military.
Israel imposed restrictions on the Gaza Strip in 2006, after Hamas abducted Israeli soldier Gilad Shalit.
The measures were tightened by Israel and Egypt in 2007, after Hamas ousted rival Fatah and forcibly took control in Gaza after winning elections the year before.
Hamas and Fatah announced a reconciliation deal in April, but the move was condemned by Israel which regards Hamas as a terrorist group.
Israel’s Science Minister Yaakov Peri told Israeli web portal Walla that he did not see a ceasefire being agreed in the coming days, as the IDF needed more time to dismantle Hamas’ underground tunnel network.
But in his BBC interview, Mr Meshaal was critical of the way Israel targeted Palestinian homes in aerial bombardments, only giving them a three-minute signal to leave.
“A Palestinian has built this home with his money. Are Israelis expecting him to leave just like that?”
He said Israel was unable to reach the underground rocket launchers, belonging “to the resistance”.
“This is why it pretends that they are in civilian areas so Israel is hitting hospitals mosques, towers and buildings,” the militant leader said.
Palestinian medical sources said the death toll in Gaza had risen to more than 750 on Thursday.
Israel says 31 soldiers, two Israeli civilians and a Thai worker Israeli city of Ashkelon have been killed since 8 July.