The Israeli military launched Monday a massive raid on Gaza's Al-Shifa Hospital, causing multiple casualties and a fierce fire, according to Palestinian health authorities.

Israeli soldiers had conducted a "precise operation" based on intelligence that the hospital was being used by senior Hamas leaders and were allegedly fired upon when they entered the compound.

"The troops responded with live fire and hits were identified. Our troops are continuing to operate in the area of the hospital," it said in a statement.

Al-Shifa, the Gaza Strip's biggest hospital before the war, is now one of the only health care facilities that is even partially operational in the north of the territory and is also housing hundreds of displaced civilians.

"Suddenly, we started to hear sounds of explosions, several bombings, and soon tanks started to roll, they came from the western road and headed toward Al-Shifa, then sounds of gunfire and explosions increased," Mohammad Ali, 32, a father of two, who lives around 1 kilometer from the hospital, told Reuters via a chat app.

"We don't know what is happening, but it looked as if it was a reinvasion of the Gaza City," he added, saying that the military activities began at around 1 a.m. (11 p.m. GMT Sunday).

The Gazan Health Ministry said a fire broke out at the entrance of the hospital complex, causing cases of suffocation among displaced women and children sheltering in the hospital. It said communication had been cut off, with people trapped inside the surgery and emergency units of one of the buildings.

"There are casualties, including deaths and injuries and it's impossible to rescue anyone due to the intensity of the fire and targeting of anyone approaching the windows," the ministry said.

The Israeli army dropped new leaflets around the hospital in Gaza City.

"To all those who exist or are displaced in Rimal and the displaced in Al-Shifa and its vicinity: you are in a dangerous combat zone. The IDF is operating hard in its residential areas to destroy terror infrastructure," said the statement, which ordered the people to take the coastal road towards al-Mawasi in the southern Gaza Strip.

The military issued grainy drone footage of the operation which it said showed troops coming under fire from several buildings in the hospital complex. Footage circulated on social media appeared to show an Israeli tank blocking the main gate of Al-Shifa.

The military said troops had been instructed on the importance of operating cautiously as well as on measures to be taken to avoid harm to patients, civilians, medical staff and medical equipment and said patients were not required to evacuate.

Not far from Al-Shifa, Israeli army forces raided a school where displaced families were sheltering and detained several men there, residents and local media said. Residents reported tanks were also operating on the edge of the Beach refugee camp and said tanks fired shells at some buildings nearby.

Hamas said in a statement the Israeli military had committed a new crime by directly targeting the hospital buildings without caring about patients, medical staff, or displaced people there.

Israel came under fierce criticism last year when troops first raided the hospital, where they allegedly uncovered tunnels they said were used as command and control centers by Hamas.

Hamas and medical staff deny the hospital has been used for military purposes or to shelter fighters.