Desmond Tutu, the South African Nobel laureate, said yesterday there was a "possibility" Israel had committed a war crime when 18 Palestinians from a single family were killed by Israeli artillery shells in Gaza two years ago.

Tutu said the Israeli attack, which hit the Athamna family house, showed "a disproportionate and reckless disregard for Palestinian civilian life".

The archbishop presented his comments in a final report to the UN Human Rights Council, which had sent him to Gaza to investigate the killings in Beit Hanoun in November 2006. For 18 months Israel did not grant the archbishop or his team a visa. They entered Gaza in May this year on a rare crossing from Egypt.

On the three-day visit, Tutu and his team visited the house, interviewed the survivors and met others in Gaza, including the senior Hamas figure and former prime minister, Ismail Haniyeh. At the time, Tutu said he wanted to travel to Israel to hear the Israeli account of events, but he was not permitted.

"In the absence of a well-founded explanation from the Israeli military - which is in sole possession of the relevant facts - the mission must conclude that there is a possibility that the shelling of Beit Hanoun constituted a war crime," Tutu said in his report to the 47-member council.

Tutu also said that rockets fired by Palestinian militants into southern Israel should stop and should be investigated. "Those firing rockets on Israeli civilians are no less accountable than the Israeli military for their actions," he said.

For the past three months a ceasefire between Israel and the militant groups in Gaza has been in place. It has significantly reduced the number of incidents and the death toll from the conflict there. Israel maintains a tough economic blockade on the territory, restricting imports and banning nearly all exports.

"It is not too late for an independent, impartial and transparent investigation of the shelling to be held," Tutu said.

He said those responsible for firing the shells should be held accountable, whether the cause of the incident was a mistake or wilful.

After the incident, Israel's military said the shelling into Beit Hanoun that day was a mistake and was the result of a "rare and severe failure in the artillery fire-control system" which created "incorrect range-findings". It said the shells had been aimed 450 metres away from the edge of town. No legal action was taken against any officer. However, it is unclear why the artillery was fired so close to a residential area that morning and why shells continued to be fired after the first one hit the Athamna house.

Tutu also said he recommended that Israel pay adequate compensation to the victims "without delay". His report said "reparation" should also be made to the town of Beit Hanoun itself, and suggested a memorial to the victims would also help the survivors. He suggested a physiotheraphy clinic as one possibility.

The survivors in the family remain bitter and most of the large extended family no longer live in the building. Since the shelling they have received no financial help, apart from a monthly stipend from the Palestinian Authority of £50 for each of the 18 dead.

Aharon Leshno-Yaar, Israel's ambassador to the UN in Geneva, where the Human Rights Council was meeting, rejected Tutu's report as "another regrettable product of the Human Rights Council".

"It is regrettable that this mission took place at all," he added.

Leshno-Yaar said the report gave de facto legitimacy to Hamas, the Islamist movement that won elections in 2006 and then seized full control of Gaza last year. "This does not serve the interests of Israel or the Palestinians or the cause of peace," he said.