An Israeli military Apache fired missiles at a Palestinian car on the coastal road in Gaza killing Mohammad Sheikh Khalil, 32, a prominent leader of Al Quds brigades, the military wing of the Islamic Jihad.
Another Palestinian was killed in blast, and five others were injured.
The Israeli army confirmed it carried the assassination, an Israeli source reported.
The assassination was carried out shortly after the Israeli Prime Minister Ariel Sharon spoke in front of the Likud central committee.
Khalil is from the Rafah refugee camp, in the southern part of the Gaza Strip. He was arrested in 1993 and was sentenced to five years and a half.
Ashraf, the brother of Khalil was killed in a gun battle with the Israeli army in 1991, while he other brother Sharaf was killed by the army in 1992.
Sheikh Khalil lost one of his legs in November 1991 during and exchange of fire with the Israeli army, and escaped four previous assassination attempts. The latest assassination attempt against him was in October 2004 when the Israeli air force shelled his home; his brother Mahmoud was killed in the attack.
The Islamic Jihad Movement vowed to avenge the assassination of Sheikh Khalil.
The movement said that its fighters would abandon a cease-fire which was achieved on February 2005, and avenge the assassination of Khalil.
Khader Habib, Islamic Jihad media spokesperson, said that the movement will retaliate to the assassination.
Ã¢â‚¬Å“This assassination will not stop our resistance, we will retaliate harshly to this crimeÃ¢â‚¬Â, Habib said, Ã¢â‚¬Å“If Israel continues its assassinations and attacks, then the truce will be voided, and Israel is to be held responsible for this escalationÃ¢â‚¬Â.
Also, Habib added that the Palestinian factions will hold a meeting soon, to discuss the Israeli military escalation, adding that the factions held a meeting on Saturday and were committed to the truce, Ã¢â‚¬Å“but now, after the escalation and the repeated attacks, we have to meet again and decide a Palestinian stance approved by all factionsÃ¢â‚¬Â.
On Sunday evening, Hamas leader Mahmoud Zahhar said that the movement will stop firing homemade shells at Israeli areas.
Also on Sunday, senior Hamas political leader, Mahmoud Zahhar, said that the movement declared an end to its operations from the Gaza Strip against the Israeli army.
Zahhar stated that the movement took this decision in order to protect the Palestinian people from the Israeli attacks.
Ã¢â‚¬Å“We decided to end attacks from Gaza in order to protect the Palestinian people from the Zionist aggressionsÃ¢â‚¬Â, Zahhar said.