GAZA CITY, Gaza Strip - Israel dropped a large bomb on the apartment building housing a top Hamas official in Gaza on Thursday, killing him and 11 other people in the first such attack on the Hamas leadership in its six-day-old offensive against the coastal enclave.

As the aerial bombardment escalated, the army said it was also poised to launch a ground invasion.

Israel also appeared to be sounding out a possible diplomatic exit from the offensive by demanding international monitors as a key term of any future truce.

The bombing targeted 49-year-old Nizar Rayan, ranked among Hamas' top five decision-makers in Gaza. His four-storey apartment building crashed to the ground, sending a thick plume of smoke into the air and heavily damaging neighbouring buildings.

It killed Rayan and 11 others, including two of his four wives and four of his 12 children, Palestinian health officials said. The Muslim faith allows men to have up to four wives.

Hamas leaders went into hiding before Israel launched the offensive on Saturday, but Rayan was known for openly defying Israel. He was seen earlier Thursday praying in a mosque, and the military said he had a tunnel under his house that could serve as an escape route.

A professor of Islamic law, Rayan was closely tied to Hamas' military wing and was respected in Gaza for donning combat fatigues and personally participating in clashes against Israeli forces. He sent one of his sons on an October 2001 suicide mission that killed two Israeli settlers in Gaza.

"We are trying to hit everybody who is a leader of the (Hamas) organization, and today we hit one of their leaders," Israeli Vice-Premier Haim Ramon said in a television interview.

Defence officials said a 900-kilogram bomb was used to attack Rayan's home, and that weapons stored inside set off secondary explosions. They spoke on condition of anonymity because they weren't authorized to speak to the media.

Israel has assassinated top Hamas officials in the past, including the group's paraplegic spiritual leader, Sheik Ahmed Yassin, who was killed in a wheelchair as he left a mosque in 2004. It had halted the practice during a recent six-month truce, which expired last month and collapsed into all-out violence last week.

Israel launched the offensive to crush militants who have been terrorizing southern Israel with rocket fire from Gaza since the truce expired.

Israeli warplanes have carried out some 500 sorties against Hamas targets, and helicopters have flown hundreds more combat missions, a senior Israeli military officer said Wednesday.

More than 400 Gazans have been killed and some 1,700 have been wounded, Gaza health officials said. The UN says the death toll includes more than 60 civilians, 34 of them children.

Three Israeli civilians and one soldier have also died in rocket attacks that have reached deeper into Israel than ever before, bringing one-eighth of the population within rocket range.

Throughout the day, huge blasts had rocked cities and towns across Gaza as Israeli warplanes went after Gaza's parliament building, militant field operatives, police and cars. The military said aircraft also bombed smuggling tunnels along the Gaza-Egypt border, part of an ongoing attempt to cut off Hamas' last lifeline to the world outside the embattled Palestinian territory.

So far, the campaign to crush rocket fire on southern Israel has been conducted largely from the air. But military spokeswoman Maj. Avital Leibovich said preparations for a ground operation were complete.

"The infantry, the artillery and other forces are ready. They're around the Gaza Strip, waiting for any calls to go inside," Leibovich said.

Thousands of soldiers were massed along the border with Gaza, backed by tanks and artillery. Along the border, the ground troops watched warplanes and attack helicopters flying into Gaza, cheering each time they heard the explosion of an air strike.

Hamas threatened to take revenge against the Israeli soldiers massed along the border with Gaza.

"We are waiting for you to enter Gaza to kill you or make you into Schalits," the group said in a statement, referring to Sgt. Gilad Schalit who was seized by Hamas-affiliated militants 2 1/2 years ago and remains in captivity.

Israeli cabinet ministers have been unswayed by international calls to end the violence.

Instead, they authorized the military to push ahead with its campaign against Gaza militants, who fired more than 30 rockets into Israel Thursday, the military said. No injuries were reported, but an eight-storey house in Ashdod, 37 kilometres from Gaza, was hit by a rocket.

Israel's foreign minister, Tzipi Livni, was in Paris on Thursday to prepare for an upcoming Mideast visit by French President Nicolas Sarkozy to push for an end to the violence. She told reporters the offensive was launched "to change the equation" with Hamas. She said the operation has badly damaged the Islamic militant group.

"We affected most of the infrastructure of terrorism in Gaza Strip and the question (of) whether it's enough or not will be according to our assessment on a daily basis," Livni said.

Earlier this week, Israeli Prime Minister Ehud Olmert rebuffed a French proposal for a two-day suspension of hostilities. But at the same time, he seemed to be looking for a diplomatic way out, telling U.S. Secretary of State Condoleezza Rice and other world leaders that Israel wouldn't agree to a truce unless international monitors took responsibility for enforcing it, government officials said. They spoke on condition of anonymity because the talks were confidential.

International intervention helped Israel accept a truce that ended its 2006 war with Lebanese Hezbollah guerrillas, when the UN agreed to station peacekeepers to enforce the terms. This time, Israel isn't seeking a peacekeeping force, but a monitoring body that would judge compliance on both sides.