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Displaced people sheltering in the area said their tents were torn down by the force of the strike.
Israeli army fought Hamas and Islamic Jihad militants in the heaviest combat.
Palestinians have reacted cautiously ahead of Israel's response saying they're exhausted and can't stand more setbacks and disappointments.
The latest casualties bring the total Palestinian death toll to 37,834, with 86,858 injuries reported since the outbreak of the Palestinian-Israeli conflict.
The military has claimed that the "conduct of the forces in the video of the incident does not conform to the values" of the Israeli military.
Israel's air and ground offensive has killed more than 37,400 people in the Hamas-ruled Palestinian territory, according to health authorities there.
The announcement also comes on the eve of the Muslim holiday of Eid al-Adha.
Israel's ground and air campaign in Gaza killed more than 36,000 people, mostly civilians.
More than 36,000 Palestinians have been killed in Israel's Gaza offensive, the enclave's health ministry said.
US was closely monitoring the probe into a deadly Israeli airstrike on Rafah.