Israel killed a Hamas member Tuesday in retaliation to gunfire that wounded a soldier along the Gaza border, said the health ministry in the coastal enclave.
The development prompted Israel to suspend a Qatari financial donation to Gaza.
Ministry spokesman Ashraf al-Qudra told AFP that Mohammed al-Nabaheen, 24, was hit by tank fire and died, while two other people were hurt.
Hamas, which controls Gaza, confirmed he was a member of its armed wing, the Ezzedine al-Qassam Brigades.
The Israeli army said it had targeted a Hamas observation post after a soldier was lightly wounded when a bullet struck his helmet.
In a statement, it said an initial investigation found "an assailant fired at troops" during a riot that included rock-hurling.
A picture published by the army on social media showed the soldier's damaged helmet.
It was the first time in weeks that an Israeli soldier had been reported injured by gunfire along the border, though earlier Tuesday the army said shots were also fired at troops in a separate incident.
In response a tank targeted a Hamas military post without reports of any injuries.
Israel holds Hamas responsible for all fire from the Gaza Strip, even if it carried out by smaller groups.
At least 244 Palestinians have been killed in Gaza by Israeli fire since regular protests began along the border in March. Most were killed during the often violent protests, though others were killed by tank fire or air strikes.
Two Israelis, including a soldier shot along the border, have died.
Israel accuses Hamas of orchestrating the protests and using them as cover for attacks.
The flare-up led Prime Minister Benjamin Netanyahu to cancel a Qatari donation of $15 million for Gaza that had been due on Wednesday as part of international efforts to head off escalation, said an Israeli official.
The official did not say when the payout might now take place.
