Palestinians killed in Israeli operation to destroy Gaza tunnel
Fighter Ahmed Abu Armanah, aged 25, and Mesbah Shubeir, a field commander, were among those who died when a tunnel was blown up near to a Gazan city that borders Israel.
A security source said some of the men were members of Islamic Jihad, an Islamist group allied to Gaza's rulers Hamas.
Gaza's health ministry spokesman Ashraf al-Qudra said in a statement that nine other men were injured in the explosion.
Israeli military spokesman Lieutenant-Colonel Jonathan Conricus said the tunnel destroyed was in the process of being dug from the southern Gaza city of Khan Younis, which borders Israel.
Asked by reporters if Hamas, rather than another armed faction, had dug it, Conricus said: "I cannot confirm that."
"The IDF [Israel Defence Forces] does not intend to escalate the situation but stands prepared for a variety of scenarios," the spokesman said.
"The working assumption is that this is not the only tunnel that Palestinian terrorist organisations are trying to dig."
Islamic Jihad said in a statement that the tunnels were "part of the policy of deterrence to defend the Palestinian people".
It said the Israeli attack "targeting mujahedeen and civilians is a dangerous escalation", adding that they would study potential responses.
Jamil Mezher, a member of the secular leftist Popular Front for the Liberation of Palestine's (PFLP) political bureau based in Gaza has urged a united front among Palestinian parties to "defeat the aggression of Israelis".
Tunnels dug by Hamas were a key issue in the last war with Israel in 2014, but discoveries of those stretching into the Jewish state have since been rare.
Israel has been constructing a sensor-equipped anti-tunnel underground wall along the 60km-long Gaza border, aiming to complete the $1.1 billion project by mid-2019.
Prime Minister Binyamin Netanyahu on Monday credited Israel's "groundbreaking technology" for the discovery of the tunnel without giving further details.