Crazy Water Park had already been closed down for two weeks by the Hamas government, over an "unlicensed water whirl", when 40 armed arsonists struck in the middle of the night last month.

They set fire to the resort's two main buildings and a tented mosque, causing more than $300,000 (£191,000) worth of damage and leading the owners to wonder whether it was a doomed project.

The theme park, on the fringes of Gaza City, had suffered a previous arson attack on 20 August during Ramadan, following false rumours that it was hosting mixed-gender parties, and had to close for three days because of the damage.

Then, on 5 September, the Hamas attorney-general ordered the resort's closure for another three weeks. "We were informed there was an unlicensed water whirl," said Ala'aeddin al-Araj, one of the park's five investors. "But it was not the real reason, because there are about 20,000 unlicensed water whirls in the Gaza Strip."

On 19 September came the biggest attack. Despite the lockdown that Hamas security forces have on Gaza City, a large group of gunmen moved unhindered through checkpoints and, according to Araj, spent considerable time setting fires at the resort. "It was well organised," he said. "We know the attack took place under government eyes."

The idea behind Crazy Water Park, a landscaped garden with pools, water chutes and a cafe, was to provide a place for family enjoyment amid the grinding oppression of blockaded Gaza. Its owners were careful to respect the mores of socially conservative Gaza: family areas were kept separate from a men-only section; only girls under the age of 12 were permitted to swim; places were provided for prayer.

The resort opened on 16 June and was instantly popular, with long queues forming outside. The 10 shekels (£1.70) entrance fee (free for children under six) made it accessible as a treat for many Gaza families. It hired 110 workers in a place with 40% unemployment – one of the highest rates in the world. There were ambitious plans for expansion. Now, said Araj, the attacks have made its backers lose confidence.

The businessman – who as a moderate independent was minister for national economics in the first Hamas government from March 2006 to March 2007 – believes that Hamas has commercial objections to Crazy Water Park, which is in competition with the government's own enterprises. This has led it to turn a blind eye to attacks by extremists who have moral objections. "I believe the extremists are not the majority in Hamas, but they have the power," said Araj.

The experience of Crazy Water Park is part of a wider attempt to impose "good behaviour" on Gaza's population, according to Hamdi Shaqqura of the Palestinian Centre for Human Rights (PCHR). He cites restrictions on internet cafes, the closure of beach-front restaurants over the summer, a ban on women smoking shisha pipes in public and a prohibition on the display of lingerie in shop windows. Head teachers have been told they may impose Islamic dress codes on girls, and men have been banned from teaching in girls' high schools. Some say that women have been reprimanded for sitting with crossed legs in public.

"Sometimes the government does not explicitly announce new measures," said Shaqqura. "Places are informally approached by security services without official documentation. There is no legal justification. People don't know what the limits are, what the law says. They are left to the mercy of the security agents."

Ahmed al-Yazji, the owner of the Orient House restaurant in one of Gaza's beach-front hotels, has direct experience of this ambiguity. First he was told he must apply for a permit to hold live music evenings. Then he had to sign a pledge that such parties would be within unspecified "morals and traditions". Finally, last month his restaurant was raided during a party.

"The police saw there were women smoking nargila [shisha pipes]," he said. "They said it was not allowed, and told me to take them away."

Yazji was forced to shut his restaurant for three days. "There has been no further trouble," he said. "But they [the security forces] come to check, sometimes in civilian clothes."

There have been no parties since at the Orient House. Revenue is down 80% and Yazji has had to let 12 employees go.

"People are scared to come here," he said. "[But] we had no order to stop serving shisha to women. Gaza is not controlled by politicians but by military people. The security forces are running things."

The lack of clear regulations "means it's up to individuals in the security forces to decide whether something is immoral or contradicts sharia law," said Mkhaimer Abusada, professor of political science at Gaza's Al-Azhar University. "My understanding is that there are many people in Hamas who are not happy about this. But the hardliners within the government are in control. The moderate voices are very marginal."

Hamas, he said, was also responding to pressure from the Salafis, adherents of an ultra-conservative form of Islam, which seeks to eradicate "un-Islamic" behaviour. "Hamas is trying to contain them," said Abusada. "This is a grand plan to Islamise Gazan society. If you connect the dots, you end up with the Islamisation of Gaza, step by step."

Such a plot is firmly denied by the Hamas government. "This is coming from social pressure, not from an intention to Islamise Gaza," said Ihab al-Ghusain, spokesman for the Interior and National Security Ministry. "We don't force people, but we are a conservative community.

"Hamas's enemies are fighting us in all the ways they can – and this is one way, to show us in this light. They want to put in the minds of people, especially in the west, that Hamas is the same as al-Qaida."

For some, the west, and Israel, must shoulder some of the blame. "The broader picture of isolation in Gaza – international sanctions and closure – is a recipe for extremism to flourish," said Shaqqura. "We are gradually moving to a monolithic society as interpreted by the ruling party. Their ideology flourishes in poverty and isolation. You can see the impact of this clearly."