(Updates with more air strikes, fourth death)

By Nidal al-Mughrabi

GAZA, May 19 (Reuters) - Israel killed four Palestinians in air strikes targeting Hamas militants on Saturday as it tried to stop makeshift missiles being fired from the Gaza Strip.

Earlier, Hamas militants had fired a rocket-propelled grenade at an Israeli army bulldozer inside the Gaza Strip lightly wounding two Israeli soldiers.

It was the first attack by the militant group against Israeli troops who have taken up positions just inside Gaza's northern border to try to stop the rocket launches.

A 15-year-old youth was the fourth Palestinian to die in an air strike on Saturday. Earlier, three men were killed when they were hit by a missile aimed at militants launching rockets at Israel. Local residents said they were shepherds but Israel said they were militants.

The strikes came on a day when more than a dozen rockets were fired into Israel by Palestinian militants. Nobody was hurt in Israel by the missiles, although they caused some damage in towns bordering the Gaza Strip.

Israel began a wave of air strikes against Hamas targets in Gaza starting on Wednesday and senior Israeli officials said they were considering taking tougher measures.

Israel's security cabinet will meet to discuss military options on Sunday. Media reports say that ministers are split on whether to carry out a major ground offensive or to continue with the current "limited" activity.

The air strikes have plunged the Palestinians deeper into turmoil after nine days of fierce internal fighting verging on civil war between ruling Hamas Islamists and President Mahmoud Abbas's secular Fatah faction.

Hamas and Fatah negotiators agreed in Egyptian-brokered talks to a new ceasefire starting at 1200 GMT on Saturday.

"It would be a stigma if internal violence continued amid such Israeli aggression," Fatah leader Tawfiq Abu Khoussa said.

But minutes after the ceasefire talks concluded, the convoy of one of the Fatah negotiators came under attack from unidentified Palestinian gunmen. Mohammad al-Masri, a top Abbas intelligence official, was unharmed.

Previous ceasefire agreements fell apart within hours and it was unclear whether the new one would hold, although an agreed swap of some 30 hostages taken by both sides was completed, officials from both sides said.

Israeli Defence Minister Amir Peretz said Israel had many options to try to prevent Gaza militants from firing rockets into Israel, playing down the immediate prospect of a massive ground invasion.

But Peretz added: "I think the idea of taking over Gaza again is a decision that can be made at any time."

BOMBING CAMPAIGN

Residents of the town of Beit Hanoun said five people, including three young children, were wounded by fragmentation from Israeli fire. An army spokesman said that there were no tanks in the area and that there had been no firing.

Israel has in recent days moved an undisclosed number of tanks, armoured vehicles and ground forces into areas just inside the Gaza border.

Israel's bombing campaign against Hamas has killed at least 18 Palestinians since Wednesday. Local residents said the dead included at least five civilians.

At least 49 Palestinians have been killed in the last nine days of internal fighting between Hamas and Fatah.

In the West Bank city of Ramallah, Deputy Prime Minister Azzam al-Ahmad, a Fatah leader, renewed his call for the Executive Force to be disbanded, accusing it of fuelling the internal violence.

Hamas has accused Israel of conspiring to aid Fatah in a power struggle for control of Gaza, which Israeli troops and settlers quit nearly two years ago.

Peretz said Israel hoped "moderate forces will have the upper hand" in the internal fighting.

"The Palestinian nation needs to understand that Hamas is leading them to disaster and bringing them to a catastrophe that they won't be able to get out of," Peretz told Army Radio. (Additional reporting by Adam Entous, Ori Lewis and Ari Rabinovitch in Jerusalem; Wafa Amr in Ramallah)

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