Israel pulled tanks and troops out of Rafah refugee camp on Friday under international pressure to end three days of fighting in which 41 Palestinians were killed.
An Israeli military source said forces had been "thinned out" in Rafah, a militant stronghold. Palestinian security sources said most of the estimated 100 tanks and other vehicles that rumbled into the camp on Tuesday had left but some armour took up new positions outside the camp.
"The operation is not over," said Captain Sharon Feingold, an army spokeswoman. "We are reorganising forces."
As the main invasion group withdrew, leaving behind torn-up roads and toppled power lines, hundreds of residents in Rafah's Brazil neighbourhood returned to find some 25 homes had been destroyed while they had taken refuge away from the violence.
The army disputed this figure, saying only five Palestinian homes were destroyed since the operation began. Feingold said many buildings were damaged by explosives planted by militants and by gunbattles between gunmen and soldiers.
"We took our children away and fled for our lives and as you see the houses are completely demolished," Rafah resident Naeema Abu-Jerida told Reuters. "Thank God we had time to leave, but we had no chance to take any of our belongings with us."
In the Tel al-Sultan neighbourhood, where the army pulled out its armour but continued to cut off access roads to the rest of the camp, a resident said 10 homes had been demolished and dozens damaged. He said there was no power or running water.
The Israeli army, saying it was searching for arms-smuggling tunnels dug under the Egypt-Gaza border, mounted its biggest Gaza raid in years after militants killed 13 soldiers last week.
In the past three days of violence, militants detonated bombs against Israeli forces, and helicopters fired missiles at gunmen to provide cover for tanks and troops moving through the teeming camp.
Israel has denied any systematic destruction of buildings in Rafah, saying it targeted structures militants used for cover or which concealed entrances to tunnels.
International pressure on Israel to quit the area mounted after its forces killed 10 Palestinians at a protest march in Rafah on Wednesday. Troops said they did not aim at the rally.
US President George W. Bush's administration showed rare displeasure with Israel by not vetoing a UN resolution urging an end to the violence.
In Washington, a senior State Department official said Israeli Vice Premier Ehud Olmert had assured the United States it would not demolish any more homes in Rafah or widen an adjacent flashpoint buffer zone on the Egyptian frontier.
ISRAELI POLICE CLASH WITH PROTESTERS: Israeli border police on Friday clashed with Israeli demonstrators who had marched on a Gaza Strip checkpoint to demand an end to the army's raid in Rafah.
Police dragged demonstrators and hit a small group of protesters who tried to cross through the Kissufim checkpoint between Israel and the Gaza Strip.
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