Photo: The Canadian Press. All rights reserved.

A man stands amidst the damage from a rocket fired from Gaza which landed in the middle of a residential neighborhood in the city of Kiryat Gat, Israel, Thursday, July 31, 2014.  (AP Photo/Tsafrir Abayov)

A Gaza cease-fire quickly unraveled Friday as violence erupted in and around the southern town of Rafah, with at least 35 Palestinians killed by Israeli shelling and the military saying an infantry officer may have been captured.

Israel and Hamas accused each other of breaking the cease-fire, which had been announced by the U.S. and the U.N. and took effect at 8:00 a.m. (0500 GMT) Friday. The fighting broke out less than two hours later.

The breakdown of the cease-fire and the apparent capture of the Israeli soldier set the stage for a major escalation of the 25-day-old conflict, which has already devastated large swaths of the impoverished coastal strip.

Israel had said it would continue demolishing cross-border tunnels behind its own defensive lines during the cease-fire, and the military said its troops were attacked during one such operation.

Gunmen emerged from one or more tunnel openings and opened fire, with at least one of the fighters detonating an explosives vest, Israeli army spokesman Lt. Col. Peter Lerner said.

He said 2nd Lt. Hadar Goldin, a 23-year-old from the town of Kfar Saba, was apparently captured during the ensuing mayhem and taken back into Gaza through a tunnel, while another two soldiers were killed.

"We suspect that he has been kidnapped," Lerner said, adding that the attack took place an hour and a half after the cease-fire began.

An Israeli official said the apparent abduction marked a "very dangerous escalation of violence" and that there would be no three-day humanitarian cease-fire. He spoke on condition of anonymity because he was not authorized to speak publicly about the matter.

It was not immediately clear if the possible abduction was linked to the heavy shelling in Rafah, which sent families fleeing from apartment blocks that had pillars of smoke rising from them.