Israeli tanks have entered Palestinian-controlled territory in the West Bank.
They have demolished the house of a man Israel says was behind a drive-by shooting last month.
Twelve Palestinians suspected of militant activity have been arrested in the village of Araqa.
The Israeli army says Nathir Hamad was responsible for organising an attack in October in which a Palestinian gunman dressed as an Israeli soldier entered a bus station in Afula, northern Israel and began firing at bystanders.
Israeli tanks destroyed the home he was sharing with his pregnant wife and two daughters and his parents, security officials and witnesses say.
The army withdrew once the operation was over.
The action follows suggestions by Israeli Foreign Minister Shimon Peres that the declaration of a Palestinian state could lead to the resumption of peace talks.
Prime Minister Ariel Sharon's approval of the idea was doubtful.