A woman mourns over the bodies of family members killed during Israeli bombardment in Rafah on Thursday. AFP

Israeli troops battled Hamas on Thursday in the heart of southern Gaza's main city, while pressing their offensive across the besieged territory.

Breaking through Hamas's defences of Gaza's second largest city, Israeli troops, tanks, armoured personnel carriers and bulldozers rolled into Khan Yunis, forcing already displaced civilians to flee again, witnesses said.

Hamas said late on Wednesday on Telegram its fighters were engaged in fierce battles against Israeli troops "on all axes of the incursion into the Gaza Strip", as it claimed they destroyed two dozen military vehicles in Khan Yunis and Beit Lahia in the north of the territory.

Earlier, the Israeli army said it had pierced defensive lines and carried out "targeted raids in the heart of the city", where they found and destroyed 30 tunnel shafts.

Prime Minister Benjamin Netanyahu said in a video statement that Israeli forces were closing in on the home of Hamas's chief in the Gaza Strip Yahya Sinwar, with a spokesman saying it is "underground" in the Khan Yunis area.

Sinwar stands accused of being one of the masterminds of the October 7 attacks on Israel that killed 1,200 people, mostly civilians, according to Israeli authorities, and saw around 240 hostages taken.

Israel declared war on Hamas after the deadliest attack in its history, vowing to eradicate the group and bring home all the hostages.

This picture released by the Israeli army shows troops on the ground in the Gaza Strip on Thursday. AFP

Sinwar has not been seen in public during the war, and Israel has named him and the leader of Hamas's armed wing, Mohammed Deif, as its top military targets.

But humanitarian organisations have warned the spread of the war into the south of the Gaza Strip will leave civilians who fled the north, much of which is now destroyed, with nowhere to go.

"We are devastated, mentally overwhelmed," said Khan Yunis resident Amal Mahdi. "We need someone to find us a solution so we can get out of this situation."

The latest toll from the Hamas government said the war has killed more than 16,000 people in Gaza, most of them women and children.

Agence France-Presse