Eyewitnesses in Gaza said a girl and two boys were killed and a number of other children were injured from IDF artillery shells fired on the neighborhood of Jabalya in the northern Strip.
However, officials at a Gaza hospital reported that the two boys were killed in the incident and the girl sustained critical injuries.
IDF sources said the military attacked five Qassam rocket launchers located in Beit Hanoun's industrial area, and that a number of figures were spotted around them at the time of the attack.
Sources in Gaza said the three children, all members of the same family, were killed by an artillery shell that was fired in the direction of a group of Palestinians, mostly children, between the town of Beit Lahiya and the Jabalya refugee camp.
According to the Palestinians, the charred bodies of the victims were taken to a hospital but were difficult to identify. The children killed in the attack were eventually identified as 10-year-old Mahmoud Abu Ghazla, his 12-year-old cousin Yihya Abu Ghazla and their 10-year-old relative Sarah Abu Ghazla.
The Palestinians initially believed the shelling was aimed at a cell that was planning to attack Israel, but eyewitnesses and medical sources said that there were no gunmen or rocket launchers at the scene.
An IDF source said the attack targeted five Qassam rocket launchers that were aimed at Israel. The source said that during the attack a number of figures were spotted approaching the rocket launchers.
The source did not rule out the possibility that the children may have been injured by the Qassam rockets in the area and stressed that in any case, rocket launchers are a legitimate IDF target.
"It's our duty to do everything possible to prevent attacks on Sderot and Gaza vicinity communities. Every time we identify a launcher aimed at Israel and a Qassam aimed at a house in Sderot or another target in the area, we will do everything to prevent the attack," the source said.
"The terror organizations are making cynical use of children, they are sending them to areas where the launchers are located, they are sending them to collect weapons and are consciously endangering them in places where there are IDF targets.
"We have no intention of harming Palestinian civilians. They are not our enemy, but our duty is to prevent harm to Israel's citizens and it is obvious that if we do not attack these launchers, within minutes or hours attacks on Sderot and the surroundings will begin. In the future we will also continue to hit and foil anything facing us and threatening Israel's citizens."
In recent weeks the army's Southern Command has stepped up its activity in Gaza. Just over a week ago the IDF attacked a vehicle carrying suspected terrorists in central Gaza, north of the Kissufim crossing.
According to Palestinian sources, six people, including members of Hamas, were killed in the attack.