An Israeli military spokeswoman said soldiers opened fire on militants suspected of preparing to fire a rocket at them. A security source said the troops fired a tank shell.
Officials with a militant group active in Gaza said the dead men, one of whom was pronounced dead soon after the incident and the other of whom died later, were both among their members.
Medical officials said one of those wounded in the attack was a 10-year-old girl.
Cross-border violence has abated on the Israel-Gaza frontier since a major Israeli offensive in early 2009, but Israel has staged periodic assaults which it said were in response to rocket and mortar fire by militants in the coastal territory.
A week ago Israeli shellfire killed a Palestinian woman in Gaza. Israel said it had opened fire on militants suspected of preparing to mount an attack.
Israel promised the United Nations this week to try and avoid civilian casualties in future wars.
