Palestinian militants launched yesterday their first deadly raid into Israel from Gaza since an Israeli pullout last year, killing two soldiers and abducting another in an assault in which two attackers died.

The infiltration, through a tunnel militants dug under the Gaza border fence to reach an army post, raised tensions along the frontier to their highest point since Israel completed its withdrawal last September after 38 years of occupation.

Israeli leaders ordered the army to prepare plans for a "harsh response" to the raid claimed by the armed wing of the ruling Hamas group and the Popular Resistance Committees after recent Israeli air strikes that killed 14 Palestinian civilians.

But Israeli ministers decided to hold off on any immediate action, and allow two days for talks through diplomatic channels to try to free the soldier, a political source said.

"This was a very serious Hamas terrorist attack," Israeli Prime Minister Ehud Olmert said before the closed-door meeting.

"Israel sees the Palestinian Authority headed by Chairman Abu Mazen (Mahmoud Abbas) and the Palestinian government responsible for the incident, with all that implies," he said, raising speculation Hamas leaders could be targeted.

Israeli forces scrambled into the Gaza Strip to search for the missing soldier, who the army said had been kidnapped. There was no immediate claim from any of the militant groups that took part in the dawn raid that they were holding him.

Mr Abbas, in a statement, said the raid, near the Kerem Shalom crossing, "violated the national consensus". He called on the international community "to prevent Israel from exploiting the attack to carry out large-scale aggression in the Gaza Strip".