Gaza militia leader Yasser Abu Shabab, who opposed Hamas in the strip, was shot and killed during an attempt to "resolve a dispute", his group confirmed late on Thursday.
Mr Abu Shabab "was killed after being shot in the field while attempting to resolve a dispute between the children of Abu Sanima family", his militia, the Popular Forces, said in a statement.
The group denied that he was killed "at the hands of remnants of the Hamas terrorist gang".
It pledged to "continue on the same path until the last terrorist is eliminated from the soil of Gaza, and to build a bright and secure future for our people who believe in peace".
His militia, known as the Abu Shabab Popular Forces, operated in Rafah in the southern Gaza Strip, and had worked with Israel against common foe Hamas.
Earlier in the day, Israeli media reported that Mr Abu Shabab had been injured in an “internal clash” in southern Gaza, and later died of his wounds.
Israel's army-run radio, quoting a security source, said he had died in Soroka hospital in southern Israel of unspecified wounds. But the hospital denied he had been admitted there.
The Popular Forces were one of several local militias who gained influence at the height of Israel's war in Gaza, filling a power vacuum as Hamas operatives were scattered or killed. The militias typically patrolled neighbourhoods, claimed to be protecting “humanitarian zones” or clashed with fighters from Hamas.
Hamas had accused Mr Abu Shabab and his gang of looting UN aid lorries, with Israel's support. It ordered him to surrender and face trial, accusing him of treason.
Mr Abu Shabab had admitted that his group was co-ordinating with the Israeli army in Rafah.
Prime Minister Benjamin Netanyahu also admitted in June that Israel was supporting an armed group in Gaza that opposed Hamas, after comments by a former minister that Israel was supplying a gang with arms.
