The IDF is prepared to deepen and escalate its ground operations in Gaza, defense officials said on Sunday, after the army split the territory in half and began surrounding Gaza City. Hamas, the officials said, was encountering difficulties in delivering orders to its forces. St.-Sgt. Dvir Emmanueloff, 22, from Givat Ze'ev and of the Golani reconnaissance unit, was killed on Sunday by mortar shell shrapnel during clashes with Hamas terrorists near Jabalya. Another soldier was critically wounded in the attack. Earlier in the morning, 30 soldiers from Battalion 51 of the Golani Brigade were injured in clashes and on Sunday night four soldiers were shot and wounded by Palestinian snipers. The defense officials said it was likely that a number of senior Hamas operatives and terror chiefs were hiding and conducting their operations from within Shifa Hospital in Gaza City. "Hamas operatives are in the hospital and have disguised themselves as nurses and doctors," one official said. OC Military Intelligence Maj.-Gen. Amos Yadlin told the cabinet that Hamas was using mosques, public institutions and private homes as ammunition stores. By Sunday afternoon, the IDF had divided the Gaza Strip into two segments, in a move aimed at cutting off the flow of arms, supplies and fighters to the northern part. Palestinians reported that IDF tanks had taken up positions near the former settlement of Netzarim and troops had began surrounding Gaza City. Some 40 rockets landed in Israel on Sunday, scoring direct hits in Sderot and Ashkelon, but causing no casualties. According to Palestinian media reports, IDF troops had deployed throughout the north and on the outskirts of Beit Lahiya, Saja'iya, Jabalya and al-Attatra. The Paratroopers, Golani and Givati Brigades were all operating inside Gaza. In the south, near the closed Dahiniye Airport, Palestinians also reported clashes with IDF troops. Military sources said that since Operation Cast Lead was launched last Saturday, more than 1,000 targets had been bombed by the air force. On Sunday, the Palestinian death toll climbed past 500 as IDF troops killed close to 40 Hamas gunmen during the ground operation in northern Gaza. Defense officials said the IDF operation was having an effect on Hamas's command-and-control capabilities and that the group was not able to mobilize large forces to fight against the IDF. They said Hamas was trying to kidnap soldiers operating inside Gaza and that commanders had been ordered to take extra precautions to ensure their soldiers' safety. The IDF dismissed reports of Hamas claims that it had killed several soldiers and abducted others. "Hamas is spreading these rumors," IDF Spokesman Brig.-Gen. Avi Benayahu said. "This is part of their psychological war and it consumes energy to fight them." A top Hamas terrorist, Hussam Hamdan, who was in charge of Grad-model Katyusha rocket cells in northern Gaza - behind the attacks on Beersheba and Ofakim - was killed by an IAF strike in Khan Yunis in the south of the Strip. Another senior Hamas terrorist, Muhammad Hilo, was killed in the same strike. Hilo was in charge of the Hamas special forces in Khan Yunis, the IDF said. Muhamad Shalpoch, a member of Hamas's commando forces, was also targeted by an IDF strike near Jabalya on Sunday. It was unclear whether Shalpoch was killed. Gaza health officials said around 20 civilians had also died in air strikes and shelling, including a 12-year-old girl, five members of the same family, and another eight civilians killed by a tank shell in the northern Gaza town of Beit Lahiya. Residents of the small northern Gaza community of al-Attatra said soldiers moved from house to house by blowing holes through walls. Most of the houses were unoccupied, their residents having already fled. "You entered like rats," Hamas spokesman Ismail Radwan told Israeli soldiers in a statement on Hamas's Al-Aksa TV. "Gaza will be a graveyard for you, God willing," he said. The Hamas Interior Ministry said it was still in control of Gaza and had arrested residents collaborating with Israel, as well as traders exploiting the situation to inflate their prices. AP contributed to this report.