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.

U.N. Secretary-General Ban Ki-moon said he was outraged by the assault on the U.N. 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 U.N. 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 apologize for it," he said.

John Ging, director of the U.N. Relief and Works Agency operations in Gaza, described the Israeli claim as "total nonsense" and "typical misinformation."

U.N. 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 U.N. compound distribute food aid to hundreds of thousands of destitute Gazans in the tiny seaside territory of 1.4 million people.