JERUSALEM, Jan 7 (Reuters) - An Israeli soldier was killed and four others wounded by friendly fire during a clash with Palestinian militants close to the Gaza Strip border on Friday, the Israeli army said.

The soldier was the first to be killed in action along the Gaza border since last March.

The soldiers were hit by a stray mortar shell fired by Israeli forces as they engaged with Palestinian militants along the border, an army spokesman said.

Palestinian residents of the coastal enclave said they saw a number of armed militants approach the border, adding they heard shooting and the sound of missiles being launched into Israel.

They also reported the sound of gunfire from Israeli helicopter gunships overhead but their targets were not immediately known.

A spokesman for the Democratic Front for the Liberation of Palestine told Reuters the organisation's operatives had participated in the clash and that none had been hurt.

It was the latest in a number of recent clashes between Israeli troops and Palestinian militants from the Gaza Strip. On Wednesday Israeli soldiers killed two Palestinians in a nearby area along the border as they attempted to cross into Israel, a military spokesman said.

Violence has escalated in recent weeks along the frontier, though both Israel and Gaza's Islamist Hamas rulers say they are working to avoid a full-on confrontation. (Reporting by Ori Lewis and Nidal al-Mughrabi in Gaza, Writing by Ori Lewis)