Videos from the scene in the Tal al-Sultan area on Sunday night showed a large explosion and intense fires burning.
The Israel Defense Forces (IDF) said it had killed two senior Hamas officials and that it was reviewing reports that civilians were harmed as a result of the strike and fire it ignited.
Hours earlier, Hamas had fired eight rockets from Rafah towards Tel Aviv – the first long-range attacks on the central Israeli city since January.
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Some 800,000 people have fled Rafah since the start of an Israeli ground operation there three weeks ago, but hundreds of thousands are still believed to be sheltering there.
Graphic footage showed a number of structures ablaze next to a banner saying “Kuwaiti Peace Camp ‘1’”, as well as first responders and bystanders carrying several bodies.
“We were sitting at the door of the house safely. Suddenly we heard the sound of a missile,” witness Fadi Dukhan told Reuters news agency.
“We ran and found the street covered in smoke,” he said, adding that he and others saw a girl and a young man who had been killed by the blast.
