GAZA CITY, Gaza Strip (AP) – An Israeli shell aimed at a group of militants in southern Gaza Strip slammed into a nearby house early Wednesday, decapitating a 6-year-old girl in her back yard, Palestinian medical officials and a relative said.

The Israeli military said troops had opened fire at militants preparing to launch rockets into Israel. It said it identified hitting the rocket squad, but was unaware of any Palestinian civilian casualties. Gaza’s militant Hamas rulers reported that one of their gunmen was killed in the ongoing Israeli operation in the area.

Dr. Moaiya Hassanain, a Gaza Health Ministry official, identified the dead girl as Hadeel al-Smari and said two adult relatives living in her family’s compound near the Israeli border were wounded in the attack. Associated Press Television News footage showed that the girl’s head had been blown off.

Hadeel’s cousin, Ahmad al-Smari, told The Associated Press that Hadeel was in the back yard of her family’s house when a shell struck. It was not immediately clear what she was doing outside.

“I am sure that she was up because no one can sleep day or night because of the army fire and clashes near our homes,” he said in a telephone interview from the hospital in the southern Gaza town of Khan Younis.

Militants fire at Israel from the border area where the family lives, but civilians suffer from the Israeli reprisals, he said. “Our lives are hell. We cannot sleep or enjoy peace in our houses because of the army fire,” he said.

Israeli military officials say Palestinian militants endanger civilians by using the cover of crowded residential areas to launch attacks.

The violence in Gaza has flared as Israel’s top leadership holds a series of meetings on whether to pursue a truce with Hamas or launch a bruising military operation against it. Prime Minister Ehud Olmert on Wednesday convened his Security Cabinet, a group of senior officials with security responsibilities, though it was unclear whether they would make any decisions.

Four Israeli civilians have been killed this year, ratcheting up pressure on Israel’s leadership to do something about the near-daily rocket and mortar assaults.

Militants have been bombarding southern Israel with rockets and mortars for seven years, increasing their rate of fire after Israel pulled its troops and settlers out of Gaza in 2005 and stepping up up attacks after Hamas overran Gaza last year.

Two Israelis were slightly wounded later Wednesday when a mortar shell fired from Gaza hit a paint factory at the Nir Oz communal farm, the military said. Last week, an Israeli man was killed in a mortar attack on the same factory.

Israel’s military has limited its reprisals to pinpoint attacks, fearing a broad military campaign would result in heavy casualties.

It also fears a Gaza invasion would jeopardize Cpl. Gilad Schalit, an Israeli soldier Hamas has been holding for two years. Hamas hopes to trade the 21-year-old tank crewman, who was captured in a cross-border raid, for hundreds of Palestinian prisoners, but Israel has balked at releasing the jailed militants that Hamas wants, some of whom are serving time for fatal attacks against Israelis.

Still, Israel is suspicious of Hamas’ motives in seeking a truce, especially since the militant group has declared it would take advantage of any lull in fighting to rearm.

Adding urgency to Israel’s decision are assessments by its military intelligence that Hamas is rapidly upgrading its arsenal with Iranian assistance.

Brig. Gen. Yossi Baidatz, a senior intelligence officer, told the Cabinet on Tuesday that Hamas now has rockets with a range of 12 miles (20 kilometers), endangering a significant swath of southern Israel. Militants are also increasingly using deadlier 120mm mortar shells instead of smaller ones, Baidatz said, according to a participant in the meeting.

Israeli Vice Premier Haim Ramon said Wednesday that Israel must topple the Iranian-backed Hamas government in Gaza. “The government must take a strategic decision, and the only decision that the government must take is clear and simple,” Ramon told Army Radio. “We must bring an end to the Hamas government and that needs be done through military means.”

Ramon is a close ally of Olmert but would not say whether his views reflected the Israeli leader’s. Olmert spokesman Mark Regev declined comment. In the past, the prime minister has argued against a broad operation.

Israeli troops are facing off against Hamas in Gaza while trying to make peace with Palestinian moderates in the West Bank. The two sides formally relaunched talks late last year at a U.S.-sponsored conference, and set a year-end target for reaching a final accord.

But the peacemaking has been fraught with tensions over issues that have derailed past peace talks: Israeli concerns about Palestinian attacks and continued Israeli construction in areas Palestinians claim for a future state.

In newspaper interviews published Wednesday, Palestinian Prime Minister Salam Fayyad said he was “absolutely certain” the two sides wouldn’t be able to broker a peace deal by the end of the year. With this pronouncement, Fayyad joined a growing chorus of Israeli and Palestinain officials who have expressed doubt about the ambitious timeline.