The attack, with another five Palestinians killed in a pre-dawn raid in the occupied West Bank and another death in a Gaza refugee camp, prompted revengeful calls from Hamas and Fatah for renewed suicide attacks in Israel.

Palestinian premier Ismail Haniya of Hamas joined Abbas's condemnation and declared talks on forming a unity cabinet -- seen as key to reversing an international boycott of his government -- "suspended" temporarily.

While Israeli leaders offered regret for the "tragedy" and humanitarian assistance for the wounded, the United Nations slammed the attack and called for a halt to the Gaza operations, which have killed more than 300 Palestinians since a soldier's capture in late June.

"Israeli fire killed 18 people, including women and children," said Khaled Radi, a Palestinian health ministry spokesman. Among the dead were two boys and two girls, as well as four women, Palestinian medics said.

Eleven of the dead were from the same family while another 40 people were wounded during the shelling that slammed into a row of five apartment blocks.

Another Palestinian was killed in the nearby refugee camp of Jabaliya and five others, including four militants, were killed in a pre-dawn Israeli raid near the flashpoint city of Jenin in the occupied West Bank, medics said.

Israeli leaders said they regretted the "tragedy," offered help for the wounded, and ordered an immediate inquiry into actions that led to the "tragic results."

But while Defence Minister Amir Peretz ordered a halt to all artillery fire in the coastal strip, a senior official said the four-month operation against Gaza militants firing rockets into Israel, launched after the capture of a soldier, would go on.

In a joint statement, Prime Minister Ehud Olmert and Peretz "expressed their regret over the deaths of Palestinian civilians in Beit Hanoun" and "offered the Palestinian Authority urgent humanitarian assistance and immediate medical care for the wounded.

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"Israel does everything to avoid hitting innocent civilian populations during operations, unfortunately tragedies sometimes happen. We are sorry," Foreign Minister Tzipi Livni announced.

The Gaza attack was slammed by the United Nations and Italy, but Abbas condemned the "international silence" over a Palestinian "black day."

The UN special envoy for the Middle East, Alvaro de Soto, said in a statement that he was "deeply shocked and appalled" by the deaths, called on Israel "to call off these and other military operations without delay," and on the Palestinian side to "cease all attacks against Israeli targets."

An army spokeswoman said artillery had been trained on an area used by Palestinian militants to fire rockets on the Jewish state. Twelve such projectiles exploded inside Israel over the last 24 hours and some 50 over the past week, the spokeswoman said.

"This morning, we fired artillery shells to stop rocket fire. We fired on an area where the rockets are fired from," she said.

Wednesday's deaths, coupled to 64 Palestinians killed in the Gaza Strip over the previous seven days, brings to more than 80 the number killed in Israeli operations in the territories over the last week.

In the northern Gaza town of Beit Hanun, an AFP journalist said five houses were destroyed as a result of Israeli shelling, as witnesses and a doctor at a hospital in nearby Beit Lahiya also said Israeli shells had struck homes.

"I ran away and saw a second shell strike the houses. A shell fell on people who had run out into the street," said local resident Ataf Ahmed, 22, following the attack, one day after Israel ended a deadly ground operation in Beit Hanun.

A Hamas leader and spokesman for Abbas's Fatah party called for a resumption of suicide attacks in Israel, nearly two years after factions agreed to abide by an informal truce in such bombings inside the Jewish state.

"We urge our Mujahedeen (fighters) everywhere to resume martyr operations (suicide attacks) in Tel Aviv, Jerusalem, Haifa and Jaffa and everywhere else," Hamas Nizar Rayan shouted into loudspeakers during protests in Beit Lahiya.

"Israel should be wiped from the face of the Earth. It is an animal state that recognises no human worth. It is a cancer that should be eradicated," said Ghazi Hamad, a spokesman for the Hamas-led government added.

Abbas condemned Israel's "terrible massacre" and together with Haniya demanded an urgent UN Security Council meeting to "stop these massacres".

"You (the Israelis) do not want peace at all. You have destroyed all chances of peace and you should bear all the responsibility," he told reporters.