Israeli troops backed by tanks entered an area under full Palestinian control at El Bireh, near Ramallah in the West Bank according to witness reports.
The troops, coming from the nearby Jewish settlement of Psagot, sparked exchanges of fire with Palestinian security services, the witnesses said.
However an Israeli military spokesman denied the raid, saying only that an Israeli tank fired two shells at El Bireh after Israeli troops had come under fire.
Earlier today Israeli armour penetrated some 300 metresinto a Palestinian area at Beit Hanoun in the northen Gaza Strip, in the second attack there in the day.
A Palestinian security official said that raid followed reported mortar fire against the Israeli town of Kfar Gaza, in the Negev desert near the border with the Gaza Strip.
Tensions are high in the region after the funerals of two Israeli boys who were found bound and stoned to death in a West Bank cave today.
Thousands of settlers gathered at the Gush Etzion junction in the southern West Bank for the funeral procession of Yaakov Nathan Mandell and Yosef Ishran, found murdered earlier in the day.
The 14-year-olds were discovered stoned to death in a cave near the Teqoa West Bank settlement east of Bethlehem after leaving home yesterday for a walk without telling their parents.
According to Palestinian sources, the Israeli army has arrested 18 Palestinians in connection with the killings.
Israeli Prime Minister Mr Ariel Sharon said their killings marked a "new escalation" in the Palestinian uprising.
"This is a very shocking, evil incident of a deliberate attack against children," Mr Sharon said on public television.
Defence Minister Mr Binyamin Ben Eliezer warned Israel would make all possible efforts to apprehend the perpetrators.
Top Palestinian peace negotiator Mr Saeb Erakat condemned the murders, saying: "the Palestinian Authority does not accept the killing of children and civilians, either Palestinian or Israeli."
AFP