Among the dead were a Christian mother, Maisa Abu Dawoud, and her daughter Mary, medics and the church said.
There was no immediate comment from the Israeli military.
The strike destroyed the apartment building and started a fire.
"We were asleep and suddenly heard continuous strikes and heavy explosions.The children woke up startled and started running and screaming," witness Ahmed al-Dahdouh said.
"We ran out and found that our neighbour's house was struck and there were dismembered martyrs, women, men and children.We started to pull them out, they were scattered under the rubble," he told Reuters.
Israel, which says Hamas has been rearming and launching attacks in violation of the ceasefire, has stepped up strikes on the militant group in recent weeks.
Hamas has denied trying to carry out attacks or rebuild its arsenal and accuses Israel of undermining the Gaza Strip peace deal.
Last year's US-brokered ceasefire calls for eventual reconstruction of the territory.
But little progress has been made towards implementing a deal to end the conflict that includes terms for Hamas to disarm and Israel to withdraw its troops.
Friends, including Muslims, and relatives gathered at the Saint Porphyrius Church in Gaza City to pay their respects during the funeral of the Christian mother and daughter.
Christians make up just one per cent of Gaza's more than two million population.
"Today is essentially the worst day of my life. I lost my mother and my grandmother today," Fouad al-Najjar said.
In a statement later on Saturday, the Greek Orthodox Patriarchate of Jerusalem mourned Maisa Abu Dawoud and her daughter Mary, extending condolences to their family.
"We pray for an end to the war and bombardment, for the protection of civilian lives and for a just peace in which the people of Gaza can feel secure for their children and loved ones. May their memory be eternal," the Patriarchate said.
Gazan health officials have said at least 1400 Palestinians have been killed by Israeli fire since last October's ceasefire.
Israel says four of its soldiers have been killed by militants in the Gaza Strip over the same period.
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