Gaza's Hamas-run civil defence says 11 people were killed, all from the same family, after the bus they were in was hit by an Israeli tank shell in northern Gaza.
The family, it said, were trying to reach their home to inspect it when the incident happened in the Zeitoun neighbourhood of Gaza City on Friday night.
This is the deadliest single incident involving Israeli soldiers in Gaza since the start of the ceasefire eight days ago.
The Israeli military said soldiers had fired at a suspicious vehicle that had crossed the so-called yellow line demarcating the area still occupied by Israeli forces in Gaza.
Israeli soldiers continue to operate in more than half of the Gaza Strip, under the terms of the first phase of the ceasefire agreement.
Civil defence spokesman Mahmud Bassal told AFP news agency the victims were members of the Abu Shaaban family and were killed while trying to check on their home in the area. The dead included women and children, according to the civil defence.
The Israel Defence Forces (IDF) said a suspicious vehicle was identified crossing the yellow line and approaching IDF troops operating in the northern Gaza Strip on Friday, prompting it to fire warning shots towards the vehicle.
They stated that the vehicle continued to approach the troops in a way that posed a threat, leading them to open fire according to the agreement.
Hamas claimed the family had been targeted unjustly.
The IDF has warned Palestinians from entering areas in Gaza still under its control. With limited internet access, many Palestinians are unaware of the military presence as the yellow line is not physically marked.
In a separate development, the Palestinian embassy in Cairo announced the Rafah border crossing between Egypt and Gaza will open for Palestinian residents in Egypt to return home.
On Friday, Hamas returned the body of Israeli hostage Eliyahu Margalit to the Red Cross, with ongoing discussions regarding the repatriation of other hostages' remains.
Since the onset of the conflict on October 7, 2023, over 67,900 individuals have reportedly died from Israeli attacks in Gaza, according to local health ministry figures.