Eye-witnesses originally said the explosion, late on Tuesday, was caused by a missile fired from an Israeli aircraft struck.

The Israeli army has denied any involvement.

The explosion, at a building at the Jenin refugee camp, killed Alah Sabbagh, of al-Aqsa Martyrs' Brigade, and Imad Nasharti, a member of Hamas.

In a separate incident, a suspected suicide bomber died when his car, apparently packed with explosives, blew up near an Israeli outpost in the northern Gaza Strip.

The blast occurred after Israeli soldiers fired on the car, which had failed to stop at a crossing point.

The two men killed in the Jenin refugee camp were said by Palestinian security sources to have been the leaders of their respective armed groups in the area.

Both had been wanted by the Israelis for months, they said.

'On wanted list'

The al-Aqsa brigade - which is linked to Palestinian leader Yasser Arafat's Fatah movement - and Hamas often claim responsibility for attacks on Israeli soldiers and civilians.

The two men were said to have been holding a meeting in the house at the time of the explosion.

Israel has destroyed homes of other suspected militants in Jenin

In the past, Israeli security forces have carried out a programme of "targeted killings" of known Palestinian militants whom it blamed for organising armed attacks.

Such operations have often been followed by violent retaliation by Palestinians.

Witnesses said attack helicopters and an F-16 jet were in the area at the time of the missile attack.

They said that just before the strike, Israeli tanks and other vehicles entered the refugee camp which was heavily damaged in an Israeli incursion in April after a series of suicide bombings.

However, the Fatah leader in the Jenin area, Kadoura Moussa, seemed to rule out that the explosion was caused by a missile attack.

"Apparently, it was an explosion inside the room," Mr Moussa said, the Associated Press news agency reports. It said Mr Moussa still believed Israel was involved in the killing.

The Israeli newspaper, Ha'aretz, said Israeli security sources, speaking off the record, confirmed the killings as an Israeli assassination.

Gaza death

The car explosion in the Gaza Strip occurred near the Erez crossing point.

Israeli soldiers fired on the car when it failed to slow down.

Palestinian security officers also tried to stop the car, but it exploded and set fire to an empty building.

There are no reports of other casualties besides the driver.

It is not clear whether he blew himself up or whether the charge he was carrying was set off by the Israeli fire.