The UN expressed outrage after another deadly Israeli strike near one of its schools in the southern city of Rafah killed at least 10 people, in the third such incident in 10 days.

Ban Ki-moon, UN secretary-general, strongly condemned Sunday's shelling, calling it "a moral outrage and a criminal act."

"This madness must stop," he said.

Israel's military confirmed it fired on a target near the UN school drawing a chorus of condemnation.

"The IDF [army] targeted three PIJ (Islamic Jihad) terrorists on board a motorcycle in the vicinity of an UNRWA school in Rafah," an army statement said on Sunday, referring to the UN agency for Palestinian refugees.

"The IDF is reviewing the consequences of this strike" near the school where around 3,000 Palestinians were sheltering, it said.

The strike on the school came as Palestinian factions gathered for truce talks with Egypt in Cairo and world powers voiced increasingly urgent calls for the warring sides to lay down their weapons.

"The bloodshed needs to stop," said a statement signed by the European Union and the European Commission presidents on behalf of the bloc's 28 member states.

"We deplore the terrible loss of lives, including innocent women and children," it said, condemning the "intolerable violence" being suffered by Gaza residents.

Sunday's attacks came despite signals from the Israeli government that it would reassess its operations amid reports of tanks and other vehicles leaving the war-scarred Palestinian territory.

Gaza's Health Ministry officials said nine Palestinians were killed in one of the air raids while another 10 died, witnesses said, in an attack on a UNRWA school in Rafah.

Chris Gunness, the UNRWA spokesman, confirmed that there was a shelling incident in the vicinity of the UNRWA school at about 10.50am local time.

"We can confirm, tragically again, multiple deaths, multiple injuries," he said.

"It's an appallingly unacceptable situation. We are an unarmed organisation."

Gunness said he would not speculate on whether the shelling was from Israel until an investigation was held, adding that Israeli authorities had been supplied with the precise coordinates of the school's location and were aware that it was being used as a shelter.

The previous night, in a televised address Benjamin Netanyahu, the Israeli prime minister, suggested Israeli troops would reassess the 27-day operation after completing the demolition of Hamas military tunnels under the border.

But Hamas would pay an "intolerable price" should there be more attacks, he said.

Israeli security officials have said the tunnel-demolition mission is winding down but as of Sunday, Israel was still carrying out air strikes in southern Gaza.

Al Jazeera's Imtiaz Tyab, reporting from Beit Lahiya, said the Israeli ground presence "seems to be easing off to a large degree but what we are seeing a lot of is air strikes".

"I have heard consistent sound of artillery shelling in Beit Lahiya, not far from Gaza City," he said.

"So it would appear that although Israel publicly said it will start scaling back the ground operation, it is clearly continuing.

"There's a lot of devastation in several areas there have been attacks, in Rafah and Jabaliya, but there seems to be some kind of shift in Israel's bombardment of the Gaza Strip."

Al Jazeera's James Bays, reporting from West Jerusalem, said it did appear that Israel was "winding up some of its operations and pulling troops out of Gaza".

But he said Israel's stance in ignoring ceasefire negotiations with Ban Ki-moon, UN secretary-general, and John Kerry, the US secretary of state, indicated that it was only willing to proceed "on its own terms" and at "a time of its own choosing".

"They've decided to do it on their own," he said.

"The problem with that is that those that have been mediating on both sides have made it clear they also want to deal with the substantial problems behind this, including [lifting the blockade] on Gaza.

"It's not acceptable that this situation occurs every 18 months or so but it's clear that Israel wants to deal with this on its own terms."

Soldier 'killed'

Earlier on Sunday, the Israeli army said that it had determined that Hadar Goldin, the 23-year-old soldier it said was captured by Hamas on Friday, was killed in action.

The army had previously said that Goldin went missing when its soldiers, two of whom were killed, were attacked while trying to destroy a Hamas tunnel in southern Gaza.

In a statement, the army said Goldin "was killed in battle in the Gaza Strip on Friday".

There were reports that the military had come to the conclusion after examining DNA evidence.

Al Jazeera's Bays said there was "some speculation that he was not killed by Hamas but by Israeli bombardment in that area".

"Some of the Israeli media are reporting he [Goldin} may have died as a result of the Israeli bombardment of Rafah."

Gaza's Health Ministry officials said the death toll since Israel began its offensive against Gaza on July 8 had now risen to 1,766 Palestinians, and another 9,320 people had been injured.

Among those killed were 398 children, 209 women and 74 elderly men. There were also 64 soldiers and three civilians killed on the Israeli side.

More than 255,000 Palestinians have also been displaced in the conflict.