Witnesses said the warplane fired a missile that leveled five houses in a Gaza City neighborhood. Earlier, officials at Gaza’s Shifa Hospital said at least 10 Palestinians, including three children, were killed in the attack.

Earlier in the day, Middle East tensions appeared to ease slightly as the Palestinian Authority pressed a new security plan and arrested a top tax official for corruption, and Israel reopened the university offices of a leading Palestinian moderate. Signs of a slight thaw emerged two days after senior Israeli and Palestinian Authority officials held a wide-ranging meeting on humanitarian and security issues, but violence continued to plague the Palestinian territories.

At least one Palestinian gunman was killed yesterday and two Israeli troops injured in predawn clashes close to a Jewish settlement in the Gaza Strip. Tensions were running high last week after a Palestinian bus ambush on the West Bank and an attack by a pair of suicide bombers in Tel Aviv that left a total of 12 civilians dead.

But both sides made tentative conciliatory gestures yesterday to meet Israeli calls for reform of the PA and Palestinian demands for an easing of sanctions imposed by the Jewish state. Palestinian police arrested the head of the PA’s customs and tax department on charges of corruption, Palestinian security officials here said.

Nasser Tahbub was arrested in the West Bank town of Ramallah as part of the PA’s promised crackdown on corruption, urged by the United States and Israel as well as the Palestinian public. Tahbub was arrested in his Finance Ministry office under Arafat’s orders as Israel mulled releasing part of the Palestinian customs duties and taxes it has kept since the start of the Palestinian uprising 22 months ago.

Following the high-level talks this weekend, Israel said it was considering initially releasing 10 percent of the $430 million garnered from Palestinian goods passing through its ports and borders. Israeli Foreign Ministry spokesman Noam Katz said yesterday "we have the will to transfer the money" but reiterated the need for a mechanism to ensure the funds are not used to finance anti-Israel attacks.