The militant Palestinian group Hamas has confirmed that the leader of its military wing has been killed in an Israeli air strike on a residential building in Gaza City.

What we are doing is self-defence

Gideon Meir, Israeli official

Sheikh Salah Shahada was among at least 15 people killed, including eight children, in the missile attack.

The confirmation of his death came after hours of confusion over whether the militant leader - reported to be number one on Israel's list of wanted militants in Gaza - had survived the attack.

The Israeli Prime Minister, Ariel Sharon, congratulated his forces on the air strike, which he described as "a great success".

Mr Sharon - who reportedly gave his personal approval for the operation - expressed regret for the civilian deaths, but said there could be no "compromise with terror".

All the Palestinian people will unite to revenge

Hamas official

But, in a statement issued through his spokesman, UN Secretary General Kofi Annan condemned Israel for not taking measures to avoid civilian causalities.

Israeli Foreign Ministry spokesman Gideon Meir said that the strike was a reaction to the death of dozens of Israelis in recent suicide attacks.

"We are there now to protect those people," he said. "What we are doing is self-defence."

Revenge threat

The Palestinian Authority issued a statement condemning the attack and calling for international intervention to "stop these massacres".

It accused Israel of trying to sabotage international efforts to get it to withdraw from Palestinian territories and resume negotiations.

Shahada: Israel's number one target in Gaza

About 140 people were injured in the attack, and local officials said that more people could be buried under the rubble.

The BBC's James Reynolds reports from Gaza City that the mood there is very angry, with local residents accusing Israel of deliberately targeting innocent civilians.

Correspondents says the air strike came amid reports that Hamas was participating in discussions with other Palestinian factions about the possibility of declaring a ceasefire.

Now, Hamas warns, there will be retaliation.

"Not only will Hamas take revenge for the martyrs, all the Palestinian people will unite to revenge for the blood of the martyrs," Hamas official Ismail Haniyeh said.

Palestinian police officer Jamal Halaby said he saw the missile streaking across the sky, followed by the sound of a large explosion.

"I fell out of my bed and I found myself a minute later covered in dust and stones, and the sounds of my children screaming and crying," he told the Associated Press.

Israeli forces have struck twice at Gaza in the past few days, targeting workshops where they believe Palestinians mortars and rockets used to target Jewish settlements were being made.

Clashes

After Tuesday morning's rocket attack, there were clashes, as Palestinians from Khan Yunis approached Israeli soldiers on duty near the Gush Katif Jewish settlement.

Two Palestinians were injured after shooting broke out.

Loudspeakers from mosques in Gaza City and Khan Yunis called on Palestinians to demonstrate in the streets against the raid.

Many are expected to gather later on Tuesday for the Hamas leaders' funeral.