A rocket launched from the Gaza Strip landed in a residential street in the southern Israeli city of Beersheba on Wednesday, causing serious damage to houses and cars but no casualties, the city's mayor said.

"One rocket fell, there are no casualties and security forces are in control of the situation," Beersheba mayor Rubik Danilovich told Channel 1 television.

Earlier reports said the rocket had struck a house. Residents said they sought shelter in secure rooms after air raid sirens sounded in the area.

Israel responded with an air strike east of Gaza City that hit a group of militants from the Islamic Jihad group, two of whom suffered moderate wounds, Gaza medical workers said.

Local residents in the area said they heard three rockets being launched from the spot where the air strike was aimed.

An Israeli army spokeswoman said she was checking details of events but had no immediate comment.

Beersheba is a large population centre in southern Israel, about 35 km (20 miles) east of the Gaza Strip. It had not been targeted by militants since the Jewish state's offensive on the coastal territory two years ago.

Palestinian militants mostly launch crude, inaccurate rockets and mortar shells that have a much shorter range and are aimed at areas closer to the Gaza Strip.

Longer range Chinese-made 122mm Grad rockets are launched rarely and in most cases have been aimed at the coastal town of Ashkelon, about 10km north-east of the Gaza Strip.

The Islamist Hamas group that controls the Gaza Strip and fears a renewed Israeli offensive on the coastal enclave, has urged militants to stop firing rockets and mortar shells at Israel but with only partial success.

In action along the Gaza Strip border with Israel earlier in the day, Israeli tank fire killed a Palestinian militant and wounded another and two civilians, medical officials and a militant group said.

The Israeli military said its troops shot at a group of militants after explosives detonated near an Israeli patrol along the frontier, and mortar bombs were fired at the soldiers and into Israel.

Islamic Jihad said two of its members were hit by tank shells after firing a projectile, one of them later died of his wounds.