At least 68 people were killed by an Israeli strike in central Gaza, health officials said.
It comes as the number of Israeli soldiers killed in combat over the weekend rose to 17.
Associated Press journalists at a nearby hospital watched frantic Palestinians carry the dead, including a baby, and wounded following the strike on the Maghazi refugee camp east of Deir al-Balah.
One bloodied young girl looked stunned while her body was checked for broken bones.
The 68 fatalities include at least 12 women and seven children, according to early hospital figures.
“We were all targeted,” said Ahmad Turkomani, who lost several family members including his daughter and grandson.
“There is no safe place in Gaza anyway.”
Earlier, the health ministry in Gaza gave the death toll as 70. The Israeli military had no immediate comment.
As Christmas Eve fell, smoke rose over the besieged territory, while in the West Bank Bethlehem was hushed, its holiday celebrations called off.
In neighbouring Egypt, tentative efforts continued on a deal for another exchange of hostages for Palestinians held by Israel.
The war has devastated parts of Gaza, killed roughly 20,400 Palestinians and displaced almost all of the territory’s 2.3 million people.
The mounting death toll among Israeli troops, 156 since the ground offensive began, could erode public support for the war, which was sparked when Hamas-led militants stormed communities in southern Israel on October 7, killing 1,200 and taking 240 hostage.
Israelis still largely stand behind the country’s stated goals of crushing Hamas’ governing and military capabilities and releasing the remaining 129 captives.
That is despite rising international pressure against Israel’s offensive, and the soaring death toll and unprecedented suffering among Palestinians.
“The war exacts a very heavy price from us, but we have no choice but to continue fighting,” Israeli Prime Minister Benjamin Netanyahu said.
In a nationally televised speech, Israeli President Isaac Herzog appealed for the country to remain united. “This moment is a test. We will not break nor blink,” he said.
There has been widespread anger against his government, which many criticise for failing to protect civilians on October 7 and promoting policies that allowed Hamas to gain strength over the years.
Mr Netanyahu has avoided accepting responsibility for the military and policy failures.
