Tanks and armoured vehicles began leaving the centre of town at around 4:00 am (0100 GMT) and had completed their pullout four hours later, the sources said. Troops had also withdrawn from around the nearby town of Jabaliya and its refugee camp.

An Israeli military spokesman confirmed that forces were being "redeployed" but gave no further details.

"This is a redeployment, not a withdrawal. Our operations to prevent the firing of Qassam (makeshift rockets) will continue," he told AFP.

More than 20 Palestinians were killed during the course of the operation, including three in Jabaliya on Wednesday.

Defence Minister Shaul Mofaz had ordered troops into Beit Hanun, home to some 30,000 Palestinians, in the aftermath of a rocket attack on the southern Israeli town of Sderot which killed two people, including a three-year-old boy.

Residents have said that much of Beit Hanun's infrastructure has been smashed in the course of the operation as troops demolished buildings, tore up roads and razed orange groves which had been used as cover for the firing of the Qassam rockets, named after the military wing of the Islamist group Hamas.

However the operation failed to put a halt to attacks, with army radio reporting Wednesday that more than 40 rockets had landed in Israeli territory since the start of the offensive.

Although both Mofaz and chief of staff Moshe Yaalon had publicly pledged that troops would continue to operate in the area until the rocket attacks ceased, reports have said that many officers favoured a pullout.

WAR.WIRE