Amer Abu Sitteh, 32, head of the Aburish group, and his number two Zaki Abu Zarqa were killed instantly when a missile slammed into their vehicle in Rafah.

Abu Sitteh's body was so badly burned in the explosion that medics were not able to immediately identify his body.

Earlier Thursday, Israeli forces shot dead another leading militant, a local commander of the armed wing of the Palestinian militant group Islamic Jihad, in the northern West Bank. Two other militants also died when an explosive they were planting in Gaza detonated prematurely.

The Aburish faction is a small armed group which mainly consists of dissidents from the mainstream Fatah movement of Palestinian leader Yasser Arafat and has its stronghold in the south of the Gaza Strip.

Its most recent high-profile operation came earlier this month when activists briefly kidnapped four French aid workers.

Abu Sitteh, who came from the nearby town of Khan Yunis, had been sought by Israel since 1992 over the killing of a Jewish settler. Security sources said Israel had made several requests to the Palestinian Authority for his arrest.

An Israeli military source confirmed that both men had been the target of "an air raid", adding that Abu Sitteh had been responsible for "dozens" of anti-Israeli attacks over the past decade.

He was also suspected of planning what the army called a "high quality" attack inside Gaza in the near future.

The bodies of the two men were later carried through the streets of Khan Yunis ahead of their burial on Friday.

"Revenge, revenge. Our answer will be in Tel Aviv," crowds numbering some 9,000 chanted in unison.

Israel has assassinated a number of leading Palestinian militants in recent months, including the founder of the Islamist movement Hamas, Sheikh Ahmed Yassin, and his successor as Hamas leader, Abdelaziz Rantissi.

In a speech on Thursday evening, Prime Minister Ariel Sharon vowed that "the liquidation operations would continue."

A local leader of Islamic Jihad's armed wing, the Al-Quds Brigades, was killed fighting with Israeli troops in the northern West Bank, Palestinian security officials said.

Zahel al-Ashkar was shot dead during a firefight in a field near the West Bank town of Tulkarem.

Dozens of jeeps had entered the area overnight where they carried out a series of arrests and searches of homes before becoming involved in the gunbattle with Ashkar, who was wanted by the army in connection with a series of anti-Israeli attacks.

A military spokesman confirmed Ashkar's death, adding that he had opened fire on the troops.

In addition, two militants were killed when a device they had planted near the Jewish settlement of Netzer Serani in southern Gaza exploded, Palestinian security sources said.

The deaths brought the overall toll since the September 2000 start of the Palestinian intifada, or uprising, to 4,205, including 3,208 Palestinians and 926 Israelis, according to an AFP count.

Meanwhile, Israel's defence ministry said Thursday that the construction of the controversial West Bank separation barrier would be completed by the end of next year as planned, despite recent court rulings.

"The security fence will be finished by the end of 2005," defence ministry director general Amos Yaron told army radio.

He confirmed that parts of the barrier would be redirected closer to the Green Line, the official border between Israel and the West Bank, following a recent ruling by the country's supreme court.

After the ruling on June 30, when Israel's top judges ordered modifications to a 30-kilometre (19-mile) section north of Jerusalem in order to protect the rights of tens of thousands of Palestinians, ministry officials had warned that the project could be delayed for six months.

Defence Minister Shaul Mofaz on Tuesday agreed to plans for a limited re-routing of the barrier north of Jerusalem which were drawn up in the light of the supreme court verdict.

The International Court of Justice, the UN's highest legal body, ruled earlier this month that parts built on Palestinian land were illegal and should be torn down. Israel has vowed to ignore the non-binding verdict.

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