Israeli forces fired cannons at large metal tubes floating in the Mediterranean today, trying to intercept a suspected weapons shipment heading for the Gaza Strip.
Last night, Palestinians fired a mortar which struck a home in a Jewish settlement in Gaza.
The family were unhurt, but both incidents threatened to scupper a plan to return security for parts of Gaza to the Palestinians.
Palestinians said their interior minister, Abdel Razak Yehiyeh, was due to meet Israeli Defence Minister Binyamin Ben-Eliezer later today.
Israeli officials said only that the meeting was to be held soon.
In the search for the suspected arms shipment, tanks moved up the Gaza City coast, firing cannons and machine guns at the floating tubes, as helicopters hovered overhead and naval patrol boats scoured the sea.
One container blew up when it was hit by army fire.
Israeli forces have in the past intercepted arms shipments which had been lowered into the sea and were to have been picked up by Palestinian fishing boats, the Israeli military said.
In January, Israeli commandos seized a ship, the Karine A, carrying 50 tons of munitions and watertight containers for floating the arms ashore.
The ship was seized in the Red Sea but was to have sailed through the Suez Canal and the containers were to have been lowered into the water off Gaza, the Palestinian captain said later.
The Iranian arms were destined for the Palestinian Authority, he said.
Under the tentative security deal, security for Bethlehem and parts of the Gaza Strip would be handed over to the Palestinians.
Israeli officials said that if they could prevent attacks on Israelis originating in those areas, the military would consider withdrawing from parts of the West Bank, where it controls almost all the major cities.