A suicide bomber blew himself up near Israeli troops in the south of the Gaza Strip just after Palestinian president Mahmoud Abbas arrived in the occupied territory.
The Israeli army confirmed the blast at the Gush Katif intersection near a block of Jewish settlements.
Witnesses said six Israelis were wounded in the attack, claimed by the militant Hamas group.
Abbas visited Gaza City earlier in a bid to persuade militants to lay down their arms.
He has come under pressure to end the attacks from Israeli prime minister Ariel Sharon who made a rare visit to Israeli troops in the north of Gaza.
But Palestinian militants continued to fire rockets into Jewish settlements, defying Abbas’s call to stop the attacks.