Residents said the Israelis appeared to be trying to complete their capture of Rafah, which borders Egypt and has been the focus of an Israeli assault since early May.
Tanks were forcing their way into the western and northern parts of the city on Friday, having already captured the east, south and centre.
More than eight months into the war in Gaza, Israel's advance is now focused on Rafah. (EPA PHOTO)
Firing from planes, tanks and ships off the coast drove a new wave of displacement from the city, which had been sheltering more than a million displaced people, most of whom have had to flee again.
The Gaza health ministry said at least 25 Palestinians had been killed in Mawasi in western Rafah and 50 wounded. Palestinians said a tank shell had hit a tent housing displaced families.
The Israeli military said that the incident was under review.
Earlier, the military said its forces were conducting "precise, intelligence-based" actions in the Rafah area, where troops were involved in close-quarter combat and had located tunnels used by militants.
Over the past week, the military said, troops had targeted a university that served as a Hamas headquarters from which militants had fired on soldiers, and had found weapons and barrel bombs. It did not name the university.
In the central area of Nusseirat, the military said soldiers had killed dozens of militants over the past week and found a weapons depot containing mortar bombs and military equipment belonging to Hamas.
More than eight months into the war in Gaza, Israel's advance is focused on the two last areas its forces had yet to seize: Rafah on Gaza's southern edge and the area surrounding Deir al-Balah in the centre.
Palestinian and UN figures show that fewer than 100,000 people may have remained in the far western side of the city, which had been sheltering more than half of Gaza's 2.3 million people before the Israeli assault began in early May.
In nearby Khan Younis, an Israeli air strike on Friday killed three people, including a father and son, medics said.
In parallel, Israeli forces continued a new push back into some Gaza City suburbs in the north of the enclave, where they fought with Hamas-led militants.
Residents said the Israelis had destroyed many homes in the heart of Gaza City on Thursday.
On Friday, an Israeli air strike on a Gaza City municipal facility killed five people, including four municipal workers, the territory's Civil Emergency Service said. Rescue teams were searching the rubble for more missing victims.
In the nearby Beach camp, an Israeli air strike on a house killed at least seven people, medics said.
Israeli forces are continuing a new push back into some Gaza City suburbs. (AP PHOTO)
Palestinian health officials said at least 45 Palestinians had been killed in Israeli strikes across Gaza on Friday.
Israel's ground and air campaign was triggered when Hamas-led militants stormed into southern Israel on October 7, killing around 1,200 people and seizing more than 250 hostages, according to Israeli tallies.
The offensive has left Gaza in ruins, killed more than 37,400 people, according to Palestinian health authorities, and left nearly the entire population homeless and destitute.
