In the Thursday night attack on the Itamar settlement, Palestinians armed with grenades and assault rifles entered the house of the Shabo family.
The attackers killed Rachel Shabo, 40, and her sons Neria, 16, Zvi, 12, and Avishai, 5. The settlement's security chief, who rushed to the scene, also was killed. Eight people in the house were wounded, including Shabo's 11-year-old son.
Israeli commandos stormed the house, killing one infiltrator. In the exchange of fire, the two-story house went up in flames. Soldiers conducted searches after witnesses said a second attacker jumped out a window and escaped.
In a phone call to The Associated Press, the Popular Front for the Liberation of Palestine claimed responsibility. In October, the small, radical PLO faction assassinated an Israeli Cabinet minister.
''This is a horrendous attack, and there always has to be a response for such things,'' said Sharon spokesman Raanan Gissin.
Public Security Minister Uzi Landau said Israel must hit hard at the Palestinians ''to topple the Palestinian Authority and to kick (Palestinian leader Yasser) Arafat and his close associates out of this region.''
But Foreign Minister Shimon Peres warned that would be a mistake. ''There won't be anyone to talk to, anyone to turn to,'' he said, noting that Israeli security professionals oppose expelling Arafat. Peres and Landau were interviewed Friday on Israel Radio.
At the industrial park near Erez crossing between Israel and Gaza early Friday, a Palestinian threw a grenade at Israeli soldiers, who fired back, killing the attacker and two Palestinian workers, the military and Israel Radio said.
Also a 10-year-old boy was killed when Israeli troops opened fire at a group of Palestinian children and an Associated Press reporter and photographer on a Gaza road as soldiers tore down a Palestinian police post.
Israeli military sources, speaking on condition of anonymity, said soldiers were ordered to destroy a police post that was used for firing anti-tank shells at an Israeli outpost, and soldiers fired at suspicious targets. The sources said the reporters were not a target.
On Thursday, the Israeli army began calling up reserves for what TV reports said would be a military campaign to be called ''Determined Path.'' The scope of the operation was not clear.
In late March, Israel launched operation ''Defensive Shield,'' the largest-scale offensive in 20 years, in which troops took over most West Bank towns for several weeks. That offensive was aimed at Palestinian militias but failed to crush them.
AP-NY-06-21-02 1110EDT