An Israeli air strike killed a Gaza militant Sunday just hours after Islamic Jihad vowed to observe an Egyptian-brokered truce following a day of violence which killed 10.

The spike in violence, which began when a rocket hit Israel on Wednesday and escalated sharply over the weekend, was the most deadly confrontation in and around the Gaza Strip in more than two months.

Shortly before dawn on Sunday, militant groups including Gaza's Hamas rulers and Islamic Jihad, which has been central to the latest bloodshed, said they would observe a truce as long as Israel reciprocated.

Calm prevailed for some eight hours before Israel mounted a fresh air strike on what the military said was "a terrorist squad that was preparing to fire rockets at Israel," killing one militant and wounding another.

UN chief Ban Ki-moon on Sunday condemned the spike in rocket attacks.

"The secretary general has been following with deep concern the recent escalation of violence and bloodshed in southern Israel and Gaza," said UN spokesman Martin Nesirky.

"He condemns rocket fire from Gaza, which has killed an Israeli civilian. He urges maximum Israeli restraint."

The Israeli ambassador to the United Nations Ron Prosor had earlier hit out at the UN Security Council for failing to condemn Palestinian rocket attacks.

The latest Israeli air strike raised to 10 the number of Palestinian militants killed in little more than 24 hours, in addition to an Israeli who died after being hit by rocket shrapnel.

Witnesses named the dead man as Ahmed Jarghun and said he was a member of the armed wing of the leftist Democratic Front for the Liberation of Palestine (DFLP).

The DFLP was one of the groups which had signed up to the truce, but the faction made no mention of the ceasefire in a statement in which it called on militant groups to "respond to this cowardly crime."

Later on Sunday, another leftist group -- the Popular Front for the Liberation of Palestine (PFLP) -- claimed responsibility for firing two rockets at Ashkelon.

Three more rockets crashed into southern Israel without causing injury or damage, an army spokesman said.

The Israeli strike occurred shortly after thousands of angry mourners packed the streets of Rafah for the funerals of the nine militants killed on Saturday, all of them from the Al-Quds Brigades, the armed wing of Islamic Jihad.

Wrapped in white shrouds draped with black Islamic Jihad flags, the bodies were carried through the streets as the crowds vowed bloody revenge.

Addressing the weekly cabinet meeting, Prime Minister Benjamin Netanyahu dismissed the truce as meaningless.

"There is no ceasefire," he told ministers. "I promise that the other side will pay even higher prices than what it has paid till now until it stops shooting.

"We will prevent any attempt to shoot at Israel, and will strike at anybody who nevertheless succeeds," he said, saying the Jewish state would hold Hamas responsible for "maintaining the quiet."

"We are not being belligerent and do not seek a flare-up, but will protect ourselves according to these principles."

Overnight on Saturday, sources close to Hamas and Islamic Jihad said Egyptian intelligence officials had brokered the ceasefire which would go into effect from 6:00 am (0400 GMT).

Several hours later, a senior Jihad official confirmed the movement was observing the truce, which was agreed with its leadership in the Syrian capital, Damascus.