Witnesses say Israeli military planes have fired a missile at a bridge in Gaza as Israeli troops and tanks mass along the border of the Palestinian territory.
Israel's Prime Minister, Ehud Olmert, has ordered the army to prepare for an offensive following the kidnapping of an Israeli soldier.
Israel has closed down all checkpoints around the Gaza Strip and lined up several thousand troops and armored vehicles along the border.
Meanwhile, the Palestinian militant group that abducted the soldier, Popular Resistance Committees confirmed to the Associated Press Tuesday that the soldier is still alive. However, the group said it will not release him without something in return.
The militants have demanded Israel release all all female Palestinian prisoners.
The United States and the European Union are urging the two sides to rely on diplomacy, not violence, to resolve the issue.
In another development Tuesday, Palestinian officials say rival factions Hamas and Fatah have reached agreement on a statehood plan that implicitly recognizes Israel.
However, the plan calls for continuing attacks against Israeli soldiers and settlers in the West Bank. Further details of the plan are not clear.
Israel has dismissed the announced deal as an internal Palestinian affair.
The international community has called on the Hamas-led government to recognize Israel, renounce violence and respect agreements signed by previous Palestinian administrations.
Palestinian Authority President Mahmoud Abbas of Fatah and Prime Minister Ismail Haniyeh of Hamas have been negotiating for weeks on an agreement.
The new plan, written by Palestinian prisoners in Israeli jails, is reported to call for a Palestinian state in the West Bank and Gaza.