An Israeli boy walks past a wall of a house that was hit by a shrapnel of a rocket fired from the Gaza Strip in the southern Israeli town of Beersheeba, Sunday, Jan. 11, 2009. Israeli troops battled Palestinian gunmen in a suburb of Gaza City on Sunday morning as Israel's military inched closer to Gaza's main population centers despite growing diplomatic pressure to end the conflict.

Gaza City Gaza Strip ? Israeli ground forces made their deepest foray yet Sunday into Gaza’s most populated area, with tanks rolling into residential neighborhoods and infantry fighting urban warfare in streets and buildings with Hamas militants who kept up their rocketing of southern Israel.

An Israeli army spokeswoman said residential neighborhoods in Gaza are riddled with homemade bombs and booby traps, including mannequins placed at apartment entrances to simulate militants and rigged to explode if soldiers approach.

The army “is advancing more into urban areas,” said the spokeswoman, Maj. Avital Leibovich. “Since the majority of the Hamas militants are pretty much in hiding in those places, mainly urban places, then we operate in those areas.”

Early today, Israeli navy gunboats fired more than 25 shells at Gaza City, setting fires and shaking office buildings, including the local bureau of The Associated Press. The military said that in general, the targets are Hamas installations but had no immediate information about the shelling that began just after midnight.

Before daybreak today, at least one militant was killed in an Israeli airstrike in northern Gaza, where a battle was in progress, hospital officials said.

Gaza medical officials say at least 870 Palestinians, about half of them civilians, have been killed in the conflict that began Dec. 27 with Israeli airstrikes on Hamas buildings, as well as suspected rocket launch sites and smuggling tunnels on the Egyptian border. Thirteen Israelis, including 10 soldiers, have died.

German and British envoys pressed efforts to negotiate an end to the war even though Israel and Hamas have ignored a U.N. Security Council resolution calling for an immediate and durable cease-fire.

Outgoing Prime Minister Ehud Olmert said Israel had made progress in its objectives in the Gaza offensive but was not finished yet.

“Israel is nearing the goals that it set for itself,” Olmert said. “However, further patience, determination and effort are necessary in order to achieve those goals in a way that will change the security reality in the south.”

While Olmert’s comment signaled no immediate end to the offensive, it indicated that Israel is wary of an open-ended conflict with an unclear agenda. Israel wants to end years of rocket attacks by Hamas on its southern population, a complex goal that could require Egyptian or international help in shutting off routes to smuggle weapons into Gaza from Egypt. Israel has been bombing tunnels that run under the Egypt-Gaza border.

In an e-mail message early today, Hamas leader Ismail Radwan said his group would not consider a cease-fire before Israel stops its attacks and pulls back from Gaza. He also demanded the opening of all border crossings, emphasizing the Rafah crossing with Egypt.

That would relieve economic pressure on the destitute territory but also strengthen Hamas’ control of Gaza, an odious prospect for Israelis who fear a halt to the fighting will just give Hamas another opportunity to re-arm.

Military intelligence chief Amos Yadlin told the Israeli Cabinet Sunday that Hamas’ ability to fight has been damaged, the group is suffering from ammunition shortages and has been hard hit by the deaths of senior militants. The military says troops have killed some 300 armed fighters since the ground offensive began.