Four Palestinians, including a 70-year-old man and two militants, were killed by Israeli fire in the northern town of Beit Hanun, which has been reoccupied by Israeli forces since they launched Operation Autumn Clouds early Wednesday, medics said.

On Thursday, two Israeli helicopters hovered above the town. Smoke rose from several buildings amid sporadic rounds of machine gun fire and explosions.

In an Arabic-language radio broadcast, the army urged residents to stay indoors.

"The IDF (Israel Defence Force) has entered Beit Hanun and asks all the inhabitants to stay at home until further notice," it said.

Many residents were heeding the warnings.

"We haven't moved from here for two days," said Abu Luay Zaanin from his home on the outskirts of town. "They are shooting at anything that moves.

"It is one of the most difficult incursions that we've seen. During the previous ones, they didn't occupy the whole city. Today, they are everywhere," he said.

In all, 12 Palestinians, including seven militants, and an Israeli soldier have been killed in the operation. More than 60 people, including three women and 10 children, have been wounded.

Overnight the army carried out an air raid and detained three militants in Beit Hanun, which Israeli commanders said had become a launchpad for militants firing rockets into the Jewish state.

General Yoav Galand told army radio that "our aim is to apply permanent pressure on the terrorists to make the firing of rockets more difficult."

But the incursion by infantry units, backed up by tanks and air support, has failed to stop the fire, with two more rockets hitting Israeli territory Thursday following eight the previous day.