BEIT LAHIYA, Gaza Strip - A powerful blast flattened the two-story house of a militant commander in the northern Gaza Strip on Thursday, killing three people, including a baby girl and a boy, injuring 40 and burying an unknown number of others under the rubble, Gaza's Hamas rulers and a Palestinian health official said.

Israel, which routinely accepts responsibility for attacks on military targets, denied involvement. But Hamas said the blast was caused by an Israeli airstrike and responded with a heavy barrage of rockets and mortar shells into southern Israel, wounding an Israeli woman.

The spiraling violence threatened to undermine last-ditch efforts to wrest a truce between Israel and Hamas and stave off an Israeli invasion of Gaza.

Ambulances rushed to the scene and residents of nearby homes brought over shovels and bulldozers to help dig people out of the rubble. Three people covered in blood were carried out on stretchers and hurried into ambulances that sped them away to the local hospital.

It was not clear whether the Hamas commander, Ahmed Hamouda, was inside the house at the time of the explosion.

Cars parked nearby were destroyed and covered with dust, and windows of neighboring houses and shops were shattered by the impact of the blast. Electricians were on the scene trying to disable live wires in the house, which had been reduced to a pile of debris.

Hamas security officials pushed back a screaming mob of hundreds that had gathered at the scene, to keep them from disrupting the rescue efforts.

"It was a huge explosion," said Majid Abu Samra, a local resident. "The house was destroyed, and there are people still buried under the rubble. I evacuated two women who were covered in dust and blood in my car."

Dr. Moaiya Hassanain of the Gaza Health Ministry said an infant girl, a boy and a man were killed. The man's identity was not immediately known because the body was burned so heavily.

Maj. Avital Leibovich, an Israeli army spokeswoman, said the military was not operating in the area at the time. "We deny any connection to this incident," she said.

The denial raised the likelihood that the explosion was caused by militants who mishandled explosives. Dozens of Palestinian militants have been killed in such accidents in recent years.

But Hamas insisted that Israel was to blame. "This heinous massacre reflects the ugly face of the Zionist Nazi occupation," said Abdel Latif Qanou, a Hamas spokesman.

Shortly after the explosion, Hamas said it fired a barrage of mortar shells and rockets toward southern Israel. Israel's national rescue service said a 59-year-old woman was moderately wounded when a rocket struck a home on an Israeli communal farm.

In other violence Thursday, Israeli troops killed two Palestinian militants in a clash elsewhere in northern Gaza.

The new outbreak of violence came as a key Israeli envoy, Amos Gilad, was visiting Egypt in a bid to wrap up a deal to halt the daily rocket and mortar attacks on Israel from Gaza and the Israeli land and air strikes they provoke.

Israel has repeatedly threatened to launch a massive ground offensive in Gaza if the rocket fire persists. But on Wednesday, Israeli leaders decided against an invasion for the meantime, saying they wanted to give Egypt more time to broker a truce between Israel and Hamas. At the same time, Israel - convinced Hamas would take advantage of a lull to rearm - said it would push forward with preparations for a military campaign.

Israeli government and security officials said Israel was willing to give the Egyptian mediation efforts about two more weeks to succeed, but if those efforts fail, it would invade Gaza.

Egypt is acting as middleman in the truce talks because Israel has no contacts with Hamas, which has killed more than 250 Israelis in suicide attacks and rejects the Jewish state's right to exist.

Major points of contention remain, most prominently, Israel's demand to link the truce deal to the release of an Israeli soldier held captive by Hamas for two years, and Hamas' demand that Israel open Gaza's border crossings.

Israel blockaded Gaza a year ago after Hamas, a militant Islamic group that has killed hundreds of Israelis, violently seized control of Gaza from security forces affiliated with the moderate Palestinian president, Mahmoud Abbas. It has tightened the sanctions in recent months in response to stepped-up militant attacks.

The closure has prevented the vast majority of Gaza's 1.4 million people from traveling abroad, and led to widespread shortages of fuel, electricity and basic goods.

The Israeli government is under considerable public pressure to launch a punishing assault on Gaza to stop the Palestinian rocket and mortar attacks, which have disrupted life in southern Israel and killed four people this year, including a man killed last week. But past military operations have failed to stop the barrages, and high casualties on both sides would likely result.

A major incursion into Gaza also would be liable to force Palestinian President Mahmoud Abbas to call off peace talks his government has been holding with Israel since late November. Abbas, who has ruled from the West Bank since Hamas seized power in Gaza last year, still claims to represent the people of Gaza.