(Adds Islamic Jihad, army reaction)

Nidal al-Mughrabi

GAZA, Aug 21 (Reuters) - Israeli missiles killed three Palestinian militants and two young boys in the Gaza Strip on Tuesday, Palestinian officials said, ratcheting up tensions two months after Hamas seized control of the territory.

A Palestinian health ministry official said the two boys -- aged 10 and 12 -- were in an area close to where Gaza militants had fired rockets into Israel. He added that three other boys were wounded in the attack.

The Israeli army said its forces fired at two Palestinians who were standing next to a rocket launcher soon after militants had used it to fire rockets at Israel.

The bodies of the two boys, cousins Fadi and Abed al-Kafarna, were shown to reporters at a local hospital. One of the bodies appeared to have been cut in half by the blast.

An army spokesman said that militant groups "often use children as part of their operations" to retrieve launchers and equipment following rocket attacks.

"In this recent event it seems likely that this was the case," he said.

The Islamic Jihad militant group claimed responsibility for launching the rockets into Israel and said that it was in response to the killing of three of its members earlier in the day.

The Palestinian deaths came one day after an Israeli missile strike killed six Hamas militants in one of the deadliest attacks since the Islamist group routed President Mahmoud Abbas's secular Fatah forces in the Gaza Strip in June.

An Israeli army spokesman said the three militants killed earlier on Tuesday were attacked because they were seen operating near the border fence.

Residents initially reported a missile strike on a car, but witnesses later said the gunmen, identified as members of the Islamic Jihad, were on foot.

Palestinian ambulance crews collected three bodies at the scene, and witnesses said the men were in military-style clothing.

Islamic Jihad vowed to continue firing rockets into Israel.

In the occupied West Bank, Israeli troops killed a Palestinian militant in the city of Nablus, Palestinian medical staff said.

Residents from a refugee camp in Nablus said 38-year-old Nasser Mabrouk of the Popular Front for the Liberation of Palestine, a secular militant group, was killed during a clash with Israeli troops.

An Israeli army spokeswoman said troops had shot a gunman.

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