Medical staff and witnesses said earlier one Palestinian was also wounded in the air strike in the southern Gaza Strip.

They said the target was a car driving between the town of Khan Yunis and the Deir al Balah refugee camp.

Witnesses said they saw three charred bodies dragged from the burnt out vehicle.

The Sinai coast of neighbouring Egypt is a popular destination for Israelis during the week long holiday which begins on April 18 and commemorates the biblical Exodus of the Israelites from Egypt.

Hamas identified them as Ismael Lubbad, Abdallah Lubbad and Mohammed Eldayah.

The air strike is a "serious escalation" and Israel "will bear all the consequences", the Brigades warned.

Israeli public opinion is still inflamed over the capture by militants of Israeli soldier Gilad Shalit in a cross-border raid into Israel in 2006.

Shalit is still missing, believed held somewhere in the Gaza Strip.

On Wednesday an Israeli air strike on southern Gaza killed wounded another, but generally the past few days have seen a return to relative calm after a spate of Palestinian rocket attacks into Israel and Israeli counterstrikes on Gaza.

The spate of tit for tat violence began on March 16 when a rocket fired from Gaza landed in an open area in southern Israel, without causing casualties or damage.

Within hours, the Israeli air force hit back, killing two militants from the Ezzedine al Qassam Brigades, in what some saw as a disproportionate response.

On Sunday the Israeli military made a trial deployment outside Beersheva of the first batteries of its "Iron Dome" short range missile defence system.

But officials said that the multi million dollar system, the first of its kind in the world, could not yet provide complete protection from all the rockets and mortar bombs fired from Gaza into Israel.

Each battery comprises detection and tracking radar, state of the art fire control software and three launchers, each with 20 interceptor missiles, military sources said.