Gaza ISraeli
A Palestinian woman reacts after the death of her relatives, who medics said were killed during heavy Israeli shelling at the Shejaia district, at a hospital in Gaza City.Reuters

At least 40 Palestinians have been killed in an Israeli army bombardment on the Gaza neighbourhood of Shejaiya, according to medics.

"Forty martyrs have been counted so far and bodies were picked up. Medics are searching for possibly more casualties," Naser Tattar, director of Gaza's Shifa hospital, said.

Thousands of Palestinians were reportedly fleeing the neighbourhood in northeast Gaza by foot and in the back of trucks as the bombardment continued. Palestinians leaving the scene were reported to have described the attack as a "massacre".

Hamas TV published graphic footage, allegedly from Shejaiya, that shows the aftermath of the bombardment and a number of bodies strewn on the ground.

Israeli tanks were believed to be firing into the neighbourhood with drones and fighter jets heard overheard.

"Two days ago, residents of Shaja'iya received recorded messages to evacuate the area in order to protect their lives," said an Israeli Defence Forces (IDF) spokesman.

Before the attack on the neighbourhood, Gaza's health ministry said that 348 Palestinians had been killed and nearly 3000 wounded by Israel since the start of "Operation Protective Edge". Five Israeli soldiers and two civilians have died since the unrest began.

Israel's military announced that it was to expand its ground operation, with additional assets joining "the effort to combat terror" in the territory.