Parts of the central Gaza governorate of Deir al-Balah came under siege by Israeli forces again on Wednesday as tanks blocked roads, leaving terrified civilians rushing for safety in a shrinking 'safe zone'.
More than one million Palestinians have sheltered in the dangerously overcrowded city, municipal authorities had previously said.
Families were forced to flee from shelters under heavy tank and drone fire, spending the night on the beach or roadsides without belongings.
It follows the latest Israeli evacuation orders which instructed people to leave Deir al-Balah where the military had been operating since the weekend.
Israeli forces say they have been engaged in battles with Palestinian armed groups and have "dismantled dozens of terrorist infrastructure sites, located rockets and eliminated terrorists" in the area.
One resident told Reuters news agency that he and five other families fled from Deir al-Balah on Wednesday night when drones "began firing towards the tents".
Nearby, the Al-Aqsa Martyrs Hospital has received dozens of dead after an Israeli strike hit Al-Maghazi refugee camp overnight on Wednesday.
UK-registered charity ActionAid said its partner organisation WEFAQ was forced to shut down operations and evacuate because of danger from the encroaching Israeli offensive on Wednesday.
It included closing a vital warehouse for food distribution and an IDP shelter for staff and their families.
ActionAid said Israel’s evacuation order "critically impacts their ability to deliver essential services to those in need".
Another humanitarian hub in Deir Al-Balah is also under threat after coming under siege by Israeli tanks, ActionAid said in a statement.
"This centre has been crucial in providing support and information to displaced families, and its compromised status severely hinders aid efforts," it said.
Only 16 percent of Gaza has not come under Israeli military evacuation orders, which have squeezed 1.7 million people into the coastal strip of al-Mawassi.
Repeated evacuation orders have pushed the 2.3 million population into less than 10 percent of the enclave, with families living in tents and dependent on aid hand-outs. Relentless Israeli bombing has seen attacks slice into the so-called 'humanitarian zones' killing dozens of civilians.
Aid agencies have said that al-Mawassi 'tent city' lacks basic living conditions. Residents are forced to queue for hours to fill water containers or use toilet facilities, while mothers have resorted to cleaning children with sand.
Israeli restrictions on supplies into Gaza and the blocked Rafah border crossing have hampered relief efforts while it remains too dangerous to attempt to repair damaged desalination plants.
Oxfam accused Israel in July of using water as a "weapon of war", saying it had documented systematic destruction of water facilities and it has cut external water sources which have reduced the amount of water available in Gaza by 94 percent.
Waste and rubbish have piled up among the rubble of destroyed buildings, with desperate residents reportedly resorting to searching for scraps to sell or food to eat.
The conditions are exacerbating the growth of diseases, including polio, which was recently detected in Gaza for the first time in 25 years.
International medical organisation Doctors Without Borders (MSF) said on Thursday that the charity was struggling to manage the overwhelming needs of the war-torn population.
"There is no room to put tents up. The overcrowding, severe lack of water, and minimal sanitation services are fuelling the spread of diseases," MSF project coordinator Jacob Granger said in comments carried by Reuters.
The majority of Gaza’s population has been displaced multiple times throughout the ten-month war which has destroyed swathes of the territory and triggered a major humanitarian crisis.
Over 40,200 Palestinians have been killed and nearly 93,000 wounded, making it one of the bloodiest conflicts of the 21st century.