GAZA CITY, Gaza Strip — Israeli ground troops closed in on downtown Gaza City on Tuesday, battling Palestinian militants in the streets of a densely populated neighborhood, destroying dozens of homes and sending terrified residents running for cover as gunfire and explosions echoed in the distance.

Israel's push into Tel Hawwa neighborhood was the farthest it has moved into Gaza City during its 18-day offensive against Hamas militants, and brought Israel's ground forces within a mile (1.5 kilometers) of the crowded city center. Palestinian hospital officials say more than 900 Palestinians, half of them civilians, have been killed.

Israel launched the offensive on Dec. 27 to end years of Palestinian rocket attacks on its southern towns, and Prime Minister Ehud Olmert has vowed to press forward with an "iron fist," despite growing international calls for an end to the fighting.

Palestinian rocket fire has been greatly reduced, but not halted altogether, since the offensive was launched. Some 15 rockets and mortar shells were fired toward Israel Tuesday, causing no injuries, the army said.

U.N. chief Ban Ki-moon was headed to the region Tuesday to press for a cease-fire, and a Hamas delegation resumed talks in Cairo with Egyptian intelligence officials. Egypt, a key mediator between Israel and Hamas, has been leading efforts to forge a truce.

Israeli Defense Minister Ehud Barak said the military operation would continue in order to stop rocket fire and arms smuggling into Gaza. "We are working toward those two goals while at the same time keeping an eye on the diplomatic initiatives," he said during a tour of an air force base.

The army has largely avoided the difficult terrain of Gaza City's narrow alleyways and crowded neighborhoods.

Palestinian witnesses said the Israeli forces moved overnight about 300 yards (meters) into Tel Hawwa, a neighborhood of high-rise buildings on the southeastern edge of Gaza City.

Palestinian medical officials reported at least 21 people killed in fighting throughout Gaza, though the Israeli army suggested the number could be higher.

One resident, Khader Mussa, said he fled his house while waving a white flag as the Israeli forces advanced. He spent the night huddling in the basement of a relative with 25 other people, including his pregnant wife and his parents.

"Thank God we survived this time and got out alive from here. But we don't know how long we'll be safe in my brother's home," Mussa, 35, told The Associated Press by telephone.

Several buildings were on fire, witnesses said, including a lumberyard. The sound battle could be heard clearly around the city of 400,000 as the Israeli forces, backed by artillery and attack helicopters, moved into neighborhoods east and south of Gaza City. Israeli gunboats shelled the coast from the west.