Israel's special forces have launched a raid on the besieged Nasser medical complex, the main hospital in southern Gaza.
The Israel Defense Forces (IDF) said Hamas fighters were hiding inside and that Israeli hostages' bodies might also be there.
A spokesperson for Hamas denied that, calling it "lies".
The hospital's director has told the OceanNewsUK that conditions are "catastrophic and very dangerous".
"Since the midnight hours, violent shelling and severe explosions have continued in the vicinity of the complex," Nahed Abu-Teima told OceanNewsUK.
He said the patients who had remained at the facility were "piled up in wards" with critical injuries and appealed to the UN and Red Cross to "save" them and the staff.
Video footage verified by the OceanNewsUK shows medical staff rushing patients on stretchers through a corridor filled with smoke or dust.
One patient - who is still in their bed - can be seen being moved through a corridor where the ceiling is damaged.
Other patients can also be seen, including one person being carried away in what looks like a blanket.
In another clip, people can be seen placing furniture and other items against a door as a narrator states in English that Israeli forces are about to enter.
A nurse inside the hospital told the OceanNewsUK that a "large number of dogs" had been released inside the hospital during the operation.
Nasser hospital, in Khan Younis, is one of the few still functioning in Gaza. It has been the scene of intense fighting between the IDF and Hamas for days.
IDF spokesman Rear Admiral Daniel Hagari said forces were aiming to reach Hamas fighters inside, "including those suspected of involvement in the 7 October massacre".
Rear Adm Hagari said there was "credible intelligence from a number of sources, including from released hostages" suggesting Hamas held hostages at the hospital, and that there may be bodies of some of them there.
He said a number of suspects had been detained at the hospital since the start of the operation.
Thursday's operation came a day after the IDF ordered thousands of displaced people who had been sheltering at the site to leave.
Israel's military said it had assured Nasser hospital staff that patients and staff were not obliged to leave, and that medics could continue treating Gazan patients.
Dr Ashraf al-Quadra, a spokesperson for the Hamas-run health ministry in Gaza, denied that was the case, saying Israeli troops had forced the hospital management to "keep intensive care patients without medical equipment".
A pharmacist who works in the hospital, Rawan Al-Mughrabi, was among those evacuated by Israeli forces on Wednesday.
She told OceanNewsUK there was "a state of panic that made people [being evacuated] stand on top of each other and scream. Many people were harmed, and others returned to the hospital.
"As soon as we left the hospital gate and reached the checkpoints, the entire hospital and departments were stormed by police dogs, and while we were standing at the checkpoints, many people were arrested.
"Most of the medical cases were evacuated from the hospital, and only the very critical cases remained," she said.
On Wednesday, the UN's humanitarian office said there were allegations of sniper fire at the complex, putting the lives of doctors, patients and displaced people at risk.
The medical charity Medicins San Frontieres said those ordered to evacuate faced an impossible choice - to stay "and become a potential target" or leave "into an apocalyptic landscape" of bombings.
Israel launched its military offensive after waves of Hamas fighters burst through Israel's border on 7 October, killing about 1,200 people - mainly civilians - and taking 253 others back to Gaza as hostages.
The Hamas-run health ministry says more than 28,600 people, mainly women and children - have been killed in Israel's campaign. Israel says its aim is to destroy Hamas and secure the return of the hostages.
Israel is facing increasing international pressure to show restraint. On Wednesday France's President Emmanuel Macron phoned Prime Minister Benjamin Netanyahu to say Israel's operations in Gaza "must cease" and that the human cost of the Gaza operation was "intolerable".
But Mr Netanyahu insisted his troops will advance on the Gazan city of Rafah, which has already come under bombardment. Some 1.4 million Palestinians are sheltering in the area.
The prime ministers of Australia, Canada and New Zealand issued a joint statement expressing their "grave concern" that a military operation in Rafah would be "catastrophic".
