Israeli Defense Forces (IDF) confirmed the shelling at Gaza targets Sunday evening, an incident in an escalation of back-and-forth reprisals between the two sides since last week.

"IDF soldiers identified a number of suspects attempting to fire an RPG (rocket) in their direction, and returned fire towards the suspects," the army said in a statement.

Gaza medical sources and witnesses said three Palestinians were killed and another two wounded in the Israeli artillery shelling at the northern Gaza Strip town of Beit Hanoun.

The incident came as several Gaza's rocket attacks against Israel and IDF's revenge airstrikes took place ahead of the fresh round of direct Palestinians-Israel peace talks in the Egyptian resort town of Sharm el-Sheikh scheduled on Tuesday.

Palestinian militants continued firing Kassam rockets into Israel on Sunday with no injuries or damage reported. No group claimed responsibility for the attacks.

Meanwhile, Israeli warplanes bombed last Thursday a smuggling tunnel from Egypt under the Gaza border and military training camp, wounding two, according to Palestinians. The airstrike was in response to the continued rocket fire in previous days, the army said in a statement, adding that they held the Palestinian Hamas movement responsible for all of the rocket attacks.

Israeli Shin Bet (Security Agency) chief Yuval Diskin on Sunday accused Hamas of determining to derail the direct peace negotiations with violent attacks.

"Hamas forces in Gaza and the West Bank are engaged in an effort to foil peace talks," Diskin said at the weekly cabinet session.

"The threats (of violent operations) are due to increase in the near future, as diplomatic developments occur. This is an estimate supported by real intelligence," local daily Ha'aretz quoted the security chief as saying.

Four Israelis were killed just on the eve of the official launch of the direct talks in Washington when the car they were travelling in was sprayed with automatic gunfire. Two more people were wounded in a similar attack the following day.

Analysts have repeatedly warned that the fragile peace talks could be interrupted anytime by small incidents such as violent or military attacks and regional political decisions.