GAZA’s health ministry says an Israeli air strike killed at least 70 people and 109 injured in the Al-Maghazi refugee camp in the centre of the strip.
A spokesman said the death toll was likely to rise given the large number of families living in the area.
The Israeli military told the BBC it was looking into reports of the strike.
Israeli and Arab media say Egypt, which borders the Gaza Strip, has put forward a new proposal for a ceasefire between Israel and Hamas.
Dozens of injured people were rushed from Maghazi to nearby Al-Aqsa Hospital with footage showing some children’s faces covered in blood and body bags piled outside.
The health ministry says three houses were hit in the attack late on Sunday.
According to ministry spokesman Ashraf al-Qudra, a densely populated residential block was destroyed.
A father said he had lost his daughter and grandchildren, adding that his family had fled from the north for safety in central Gaza.
“They lived on the third floor of one of the buildings,” he said. “The wall collapsed on them. My grandchildren, my daughter, her husband – all gone.
“We are all targeted. Civilians are targeted. There is no safe place. They told us to leave Gaza City – now we came to central Gaza to die.”
The Palestine Red Crescent Society says “intense” Israeli air strikes have led to the closure of main roads between Maghazi and two other refugee camps, Al-Bureij and Al-Nuseirat, “hindering the work of ambulances and rescue teams”.
In a statement to the BBC, the Israeli military said it had received “reports of an incident in the Maghazi camp”.
“Despite the challenges posed by Hamas terrorists operating within civilian areas in Gaza, the IDF [Israeli Defense Forces] is committed to international law including taking feasible steps to minimize harm to civilians,” it added.
According to the health ministry, more than 20,000 people have been killed – mostly children and women – and 54,000 injured in Gaza since 7 October, when Hamas and other Palestinian groups attacked Israel, killing 1,200 people and taking about 240 hostages.