Israeli Prime Minister Ehud Olmert says the Israeli army shelled the U.N. complex in Gaza City today because, he told reporters, soldiers "were attacked from there and the response was harsh."
The shelling set a U.N. warehouse full of food and supplies intended for Palestinians on fire.
Olmert's office confirmed to ABC News that Olmert talked with U.N. Secretary-General Ban Ki-moon and told him, "This was a sad incident for which I am sorry but our troops were attacked from there and the reaction was forceful."
The United Nations had already dismissed the self-defense charge.
"There were no militants in UNRWA [U.N. Relief and Works Agency ] compound at the time," Johan Eriksson, a U.N. spokesman, told ABC News earlier today.
Also today Israeli Defense Force officials told ABC News that Hamas Interior Minister Said Siam was killed during an Israeli airstrike on his brothers home in Gaza.
Hamas television reported that Siam was killed in what it says was an air strike that flattened a home in Gaza City. A top aide, Siam's brother and members of his brother's family were also killed, they reported.
Siam is considered to be among Hamas' top five leaders in Gaza.
U.N. representatives also claimed the rockets that struck their compound today contained white phosphorous, which is not intended for use on populated targets.
Ban, who is in Israel today trying to broker a cease-fire, called the attack an "outrage" and has demanded an investigation.
Speaking from Tel Aviv Ban told reporters, "I conveyed my strong protest and outrage to the defense minister and the foreign minister and demanded a full explanation."
Prime Minister Gordon Brown condemned Israel's shelling of the United Nations' HQ in Gaza today as "indefensible".
"When the United Nations is doing such vital work - humanitarian work amongst women and children in Gaza no one can defend this attack ," Brown told reporters.
"I hope these events will convince everybody that an immediate ceasefire is absolutely essential," he added.
According to the UN the Israelis knew what they were hitting, "this attack is unforgivable. The IDF [Israel Defense Forces] confirmed to us they have the GPS [Global Positioning System] coordinates of all our buildings in Gaza," Eriksson said.
Only three people were injured in the attack although there were 700 sheltered in the compound.
"Moreover, the Israeli army was notified that we have several fuel tankers in the compound that we intended to move to a safer location today, " Eriksson added.
The fuel from these tankers could explode at any time. Television pictures from the compound showed the U.N. warehouse engulfed by flames and stockpiles of food literally going up in smoke.
Since this conflict began Israel has repeatedly stressed Hamas' reported use of human shields, saying the militants' tactic of firing from civilian areas leads to Palestinian casualties.
In a previous attack on a U.N. school, in which 42 people died, the Israeli army claimed that Hamas fighters had been using the school as a base from which to launch rockets.
Ban told reporters today, "The [Israeli] defense minister said to me it was a grave mistake and he took it very seriously. He assured me that extra attention will be paid to U.N. facilities and staff and this will not be repeated."
At the same news conference Israeli Foreign Minister Tzipi Livni defended the Israeli army's actions.
"And at the end of the day, even though we try to avoid civilian casualties, these things happen," she told reporters.
The Defense Ministry later toned down its comment in an official statement: "Defense Minister [Ehud] Barak made it clear that Hamas is using Palestinian civilians as human shields and is firing at IDF [Israel Defense Forces] soldiers from next to U.N. installations. IDF soldiers -- in self-defense -- have responded, and will respond, to any attempt to attack them."
Reports from inside Gaza, where Western media have officially been banned, describe chaotic scenes of heavy bombardment and clashes between Israeli ground troops and Hamas fighters in the Tel Hawwa neighborhood of Gaza City.
"The Israelis continue firing everywhere, using the tanks, using the heavy machine guns, so the situation is really very tough," said Sami Zayara, an ABC News producer who lives in Gaza.
The Al Quds hospital, which houses Gaza City's main ambulance depot, was reportedly also hit by Israeli artillery, as was a high-rise apartment block and a building housing journalists.
An aid worker from inside Gaza says that part of the Al Quds hospital is in flames and all the ambulances have been grounded.
"We've been speaking to paramedics both inside the Red Crescent and inside Al Quds hospital and they say they're getting emergency calls around Gaza that they can't respond to," Caoimhe Butterly of the Palestinian-led International Solidarity Movement told ABC news by phone.
According to Butterly, water shortages mean there is not enough to put out the fire inside the Al Quds hospital and emergency services cannot get anywhere near the building as it is surrounded by Israeli snipers.
Palestinian health workers approximate the total number of dead in the conflict as 1,066 and more than 4,700 wounded. Israel has so far lost 10 soldiers and three civilians in southern Israel have been killed by rocket attacks launched from Gaza.
The militants have kept up a steady albeit reduced barrage of rockets; on Wednesday night, 21 were fired. Reports today from Be'er Sheva indicate nine Israelis have been wounded; two seriously.
Today's fresh fighting and bombardment have caused hundreds in Gaza to flee their homes looking for protection while others cower inside fearing an Israeli assault.
"God help us, God help us. Where can we flee?" one woman told an Associated Press reporter. "All I want is to get my poor child away from here. We want to survive."
Meanwhile in Egypt negotiations are under way to end the fighting. Israel has sent its envoy senior defense official Amos Gilad to discuss the "parameters of the endgame" with the Egyptians. He will not be meeting Hamas envoys who are also in town. Israeli government spokesman Mark Regev says the ongoing discussions "look promising."
Part of the talks reportedly include working out an agreement for the U.S. to supply technical support to Israel to help curb the smuggling of weapons into Gaza.
Ban is also upbeat about these discussions. He believes some elements are in place for a cease-fire to come "reasonably soon."