Palestinian resistance group Hamas has said it will not renew an informal nine-month-old truce with Israel after one of its leading activists was killed in an Israeli airstrike in Gaza.

The truce, brokered by Egypt, is due to expire at the end of the year.

The announcement from Hamas spokesman Mushir al-Masri follows Tuesday's killing of a Hamas fighter and a top fugitive from another resistance group in an Israeli airstrike on a Gaza refugee camp.

"In the face of this Zionist aggression, no one should dream about the renewal of this truce," he said.

He added that Hamas reserved the right to retaliate for the attack, though it will not pull out of the truce right now.

In the nine months since the truce was agreed, violence between the two sides has dropped sharply and Hamas has refrained from carrying out bombings in Israel.

It has, however, fired a series of rockets from Gaza at Israeli towns, in what it said was retaliation for Israeli truce violations, such as airstrikes and arrest raids resulting in several deaths.

Israeli demands

Israel meanwhile has ratcheted up its demands for a crackdown on fighters, saying Palestinian President Mahmoud Abbas must arrest armed men, not only disarm them.

In the West Bank, an Israeli soldier was killed on Wednesday during a roundup of fighters in the village of Mirka, south of Jenin.

Aljazeera's Palestine correspendent reported the Iz al-Din al-Qassam Brigades, Hamas's military wing, claimed responsibility for the killing.

In the same operation, an Islamic Jihad fighter involved in a bombing in Israel last week was arrested, the Israeli army said.

Aljazeera reported two brothers, both members of Hamas, were also arrested and a curfew was imposed on the village before Israeli troops withdrew.

More than a week of violence, including Israeli assassinations of fighters and the bombing, has undermined hopes for a return to peacemaking following Israel's withdrawal from Gaza in September.

Tuesday killings

In an Israeli airstrike on Tuesday, missiles struck a car carrying Hassan al-Madhun, a leader of the Al Aqsa Martyrs Brigade, an offshoot of Abbas' Fatah party, who was involved in a bombing at the Israeli port of Ashdod.

Israel had been pressuring Abbas to arrest al-Madhun since the beginning of the year, providing the armed man's address and cellular phone number.

The other man killed in the airstrike was rocket expert Fayiz Abu al-Qaraa of Hamas, who the military said was not a target.

At funerals on Wednesday for the two fighters, armed men fired in the air and one carried a rocket launcher. Calls for revenge blared from loudspeakers, and chants of "Death to Israel, yes to resistance," rose from the crowds.

Response

Resistance factions interpret the ceasefire to mean they can respond to individual Israeli attacks while remaining committed to the truce, a position Abbas has dismissed as unacceptable.

Since the truce, Hamas and Al Aqsa have refrained from carrying out attacks in Israel, while Islamic Jihad has been responsible for four bombings.

Israeli Foreign Minister Silvan Shalom said on Wednesday that operations against fighters would stop once Abbas, widely known as Abu Mazen, decides to disarm them.

"We said very clearly that if we leave Gaza, any operation would draw a very tough Israeli reaction," Shalom said.

"If Abu Mazen would make the strategic decision that he has refused to make, to dismantle terror organisations and prevent them from carrying out activity from the Gaza Strip, believe me, on that same day all the operations in Gaza will stop."

Struggle

Abbas is locked in a struggle with the fighters for control of Gaza and has tried, unsuccessfully so far, to stop attacks against Israel. He has shied from forcibly disarming them, fearing that would provoke civil war.

Israel, meanwhile, raised the bar on the crackdown it has demanded.

A Palestinian legislator, Ziad Abu Zayyad, told Israel's Army Radio on Wednesday that Israel had rejected a Palestinian Authority proposal that Israel stop targeting fighters if they would lay down their guns.

A senior Israeli government official said Israel tried that in the past, but fighters simply lay low for a while, then resumed their activity later. "We don't want them to lay down arms, we want them to be arrested," he said, speaking on condition of anonymity.

Raanan Gissin, an aide to Prime Minister Ariel Sharon, said: "We're not going to pay with Israeli lives while they are experimenting in trying to reach understandings with terror organisations and they continue to carry out terror attacks against us."

PHOTO CAPTION

Israeli soldiers clean the cannon of 155mm mobile artillery after firing at a position near Kibbutz Nahal Oz, just outside the northern Gaza Strip. (AFP)