JERUSALEM: Israel withdrew its troops from the Gaza Strip Saturday after some of the fiercest gunbattles with Palestinian militants in the Hamas-run territory since last year's military offensive.

Israeli troops used bulldozers to "remove infrastructure used by terrorists to attack soldiers" before the early morning withdrawal, a military spokeswoman said.

Gaza militants, meanwhile, fired a rocket into southern Israel on Saturday, but no injuries were reported, the military said. Two others fell short of Israeli territory.

The violence began Friday when soldiers patrolling the border crossed into Gaza after spotting Palestinians planting explosives near the fence with Israel.

Two Israeli soldiers and two Palestinian militants were killed in the gunbattle, the military said. Palestinian medics said one civilian was killed and seven were wounded in the fighting. Militants reported one wounded and one missing.

Israel's military held Gaza's Islamic militant Hamas rulers responsible for the violence.

"We will not tolerate any attempt to harm the citizens of the state of Israel and we will continue to operate firmly against anyone who uses terror against it," a military statement said.

The violence underscored some of the challenges the U.S. faces as it tries to get Israeli-Palestinian peace talks back on track.

Senior Israeli Cabinet ministers plan to meet Sunday to draw up a response to President Barack Obama's demand for peace gestures toward the Palestinians, Israel's Channel 10 TV reported. A government spokesman could not immediately confirm or deny the report.

The ministers began discussing the matter on Friday.

Washington has demanded the gestures to try to jump-start U.S.-brokered peace talks, which were derailed by Israeli plans to continue building in contested east Jerusalem. Israeli Prime Minister Benjamin Netanyahu wants to keep the entire holy city as Israel's capital, while the Palestinians claim the eastern sector as the capital of a future state.

Elsewhere, Egyptian police said they arrested 45 suspected smugglers over the past three days in an intensified crackdown on the hundreds of cross-border tunnels that provide a supply line to Gaza. Among the suspects was a man accused of trying to deliver $242,000 in Egyptian pounds and U.S. dollars to Hamas in Gaza, police said.

Israel and Egypt sealed their borders with Gaza in 2007 after Hamas militants overran the coastal territory. Since then, Gaza has depended heavily on smuggled cash and goods.

Egypt is building an underground barrier along its border with Gaza to try to cut off the smuggling.