Footage circulating on social media, which Reuters could not immediately verify, showed about a dozen bodies wrapped in blankets and laid on the ground at a hospital.
Residents said the building that was hit had housed at least 30 people.
The official Palestinian news agency WAFA and Hamas media put the number of people killed at 32.
There was no immediate confirmation of the tally by the territory's health ministry.
Later on Sunday, the Israeli military said it struck a site in Jabalia in which "terrorists were operating".
"These terrorists posed a threat to IDF (Israeli Defence Forces) troops operating in the area. The details are under review," the Israel military said.
The Israeli army says it has targeted militants in Jabalia that "posed a threat" to its soldiers. (AP PHOTO)
The military accused Hamas of exploiting civilian population and property for military purpose, a charge the militant group denies.
The Hamas armed wing said it attacked 15 Israeli soldiers with an anti-tank rocket before it "finished them off" by grenades and light weapons from a close range in Beit Lahiya.
There was no Israeli comment and Reuters could not independently verify the account.
The Palestinian Civil Emergency Service says its operations have been halted by an ongoing Israeli raid into two towns and a refugee camp in northern Gaza that began on October 5.
It could not provide a figure for those killed in the attack.
Israel says it sent forces into Jabalia, Beit Lahiya and Beit Hanoun in the north of the enclave to fight Hamas militants waging attacks from there and to prevent them from regrouping.
It says its troops have killed hundreds of militants in those areas since the new offensive began.
Meanwhile, Lebanon's health ministry said on Sunday that at least 23 people, including seven children, were killed and six others injured in an Israeli strike on Almat in Mount Lebanon province.
Three people were also killed and two others wounded in an Israeli strike on Mashghara in the western part of Lebanon's Bekaa Valley late on Saturday, while one person was killed and four others injured in a strike on Sahmar, also in western Bekaa, that occurred the same night, the health ministry added.
There was no immediate comment from the Israeli military, which says it is targeting Hezbollah militants in Lebanon.
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