Another Israeli bombardment killed the Hamas security chief.
The deadly chaos pitting Israeli troops against Islamic militants transformed parts of Gaza City into a full-bore war zone. Terrified residents huddled in shelters and stairwells, or scooped up toddlers and fled on foot. Blasts and bullets tore chunks out of buildings.
The Israeli attack on the UN compound triggered a fire that engulfed a warehouse and destroyed thousands of pounds of food and other aid intended for Gaza's beleaguered citizens.
Workers with fire extinguishers and Palestinian firefighters, some wearing bulletproof jackets, struggled to douse surging flames and tugged bags of flour from the debris.
The destruction delivered a sharp blow to efforts to ease what aid groups say is a full-fledged humanitarian crisis in Gaza, and ratcheted up tensions between Israel and the international community even as diplomats indicated progress in cease-fire talks.
Israeli envoy Amos Gilad returned from a daylong trip to Cairo, where he discussed a cease-fire proposal with Egyptian officials who are also trying to coax Hamas into ending the war.
Israel launched an offensive December 27 to end Hamas rocket attacks on Israel. Gaza medics say about 1,100 Palestinians, half of them civilians, have died; 13 Israelis have also been killed.
Israel's intense assaults in Gaza on Thursday seemed to reflect an extra push to pressure Hamas negotiators into making concessions on cease-fire terms, and punish the militant group as much as possible before any end to hostilities.
An Israeli airstrike killed Interior Minister Said Siam, a key figure in Hamas who oversaw thousands of security agents, Hamas television said. A top aide, Siam's brother and his brother's family were also killed.
"We are talking about a key person in terms of logistics in the field, and also in the political sense," said Bassem Zbeidy, a Hamas expert in the West Bank.
He said Siam's death was a "huge loss for Hamas," but noted that the movement is easily capable of generating new leaders, often more radical than their predecessors.
UN Secretary-General Ban Ki-moon said he was outraged by the assault on the UN compound and said Israeli Defense Minister Ehud Barak told him there had been a "grave" error.
"I conveyed my strong protest and outrage to the defense minister and foreign minister and demanded a full explanation," said Ban, who arrived in Israel on Thursday morning from Egypt.
Israeli Prime Minister Ehud Olmert said the military fired artillery shells at the UN compound after Hamas militants opened fire from the location. Three people were wounded.
"It is absolutely true that we were attacked from that place, but the consequences are very sad and we apologise for it," he said.
John Ging, director of the UN Relief and Works Agency operations in Gaza, described the Israeli claim as "total nonsense" and "typical misinformation."
UN officials said hundreds of people sheltering in the compound were forced to flee, and that the Israeli shells contained white phosphorus, an incendiary agent that can cause horrific injuries.
After the shelling, fire spread to nearby fuel tankers in the compound, triggering another massive explosion.
The UN compound distribute food aid to hundreds of thousands of destitute Gazans in the tiny seaside territory of 1.4 million people.
Ging said the UN had warned the Israeli military that the compound was in peril from shelling that had begun overnight. UN officials say they have provided Israel with GPS co-ordinates of all UN installations in Gaza to prevent such attacks.
The UN Security Council expressed "grave concern" and requested a briefing from UN officials on the attack.
"We are calling all parties to respect international humanitarian law and especially to ensure the protection of civilians," said Jean-Maurice Ripert, France's UN Ambassador.
Israeli shells also struck a hospital, five high-rise apartment buildings and a building housing media outlets in Gaza City, injuring several journalists.
Bullets entered another building housing The Associated Press offices, entering a room where two staffers were working but wounding no one. The Foreign Press Association, representing journalists covering Israel and the Palestinian territories, demanded a halt to attacks on press buildings.
The army had collected the locations of media organisations at the outset of fighting to avoid such attacks.
Gaza City resident Sami Helu, 34, was evacuated by the international Red Cross after he, his wife and 8-year-old daughter sheltered from withering fire around their apartment in the Tel Hawwa neighborhood. During the escape, he saw cars and buildings gutted by fire, billowing smoke, bomb craters, speeding ambulances and downed electricity poles.
"I saw suitcases abandoned, I think from people fleeing the area," Helu said.
"There was a car still running, there was some money inside."
Many residents had fled to the Quds Hospital on the fringes of Tel Hawwa. But an artillery shell hit the hospital's pharmacy and another landed on the stairs at the entrance.
Sporadic gun fire hit the building as patients and health workers huddled on the first and second floors, medic Khaled Abu Zeid said.
Gaza health official Dr. Moaiya Hassanain said at least 70 people were killed or died of wounds throughout Gaza on Thursday.
Israeli police said 20 rockets hit southern Israel, injuring 10 people. Five of the wounded were in a car that was struck in the city of Beersheba.
Olmert's office said US Secretary of State Condoleezza Rice telephoned him on Thursday, and he told her Israel hoped Egyptian mediators could help bring about a cease-fire and an end to weapons smuggling. The statement said Rice, who leaves office on Jan. 20, told Olmert that the US was willing to help resolve the smuggling issue.
The US administration was racing in its final days to negotiate a last-minute deal on American support for mediation efforts under which the US would provide technical support and expertise to prevent Hamas from re-arming, said US and Israeli diplomats.
It was not immediately clear if members of President-elect Barack Obama's or Secretary of State-designate Hillary Rodham Clinton transition teams were being advised of the talks, which could lead to a prominent and ongoing US role in the truce.
The diplomats spoke on condition of anonymity due to the sensitivity of the negotiations.
Israel wants a total end to Hamas' rocket launches into Israel and an arms embargo on Gaza's militant rulers. Hamas has demanded an immediate Israeli withdrawal from Gaza and the opening of blockaded border crossings.
"These are our demands and we don't accept any political movement that does not accept them," the movement's top political leader, Khaled Mashaal, said in a televised address from his headquarters in the Syrian capital, Damascus.
UN chief Ban said Israel was preparing to make a decision soon on whether to accept a cease-fire.
"I hope that decision will be the right one," he said after meeting Israeli President Shimon Peres late Thursday.
In addition to the attack on the UN headquarters, Israel shells landed next to a UN school in another Gaza City neighborhood, wounding 14 people who had sought sanctuary there, medics and firefighters said.
An Israeli attack near a UN school in northern Gaza earlier this month killed nearly 40 people. At the time, Israel said militants had fired on army positions from the area.
