The Israeli Defence Forces (IDF) said it struck an ambulance because it was carrying Hamas militants.
They said the vehicle was "identified by forces as being used by a Hamas terrorist cell in close proximity to their position in the battle zone" and added that "a number of Hamas terrorist operatives were killed in the strike".
Ashraf al-Qidra, the spokesperson for the health ministry in Gaza, said the ambulance was part of a convoy that Israel targeted leaving al-Shifa Hospital, adding that "a big number" were killed and wounded but did not give numbers.
Qidra said Israel had targeted the convoy in more than one location, including at al-Shifa Hospital gate and at Ansar Square a kilometre (0.6 miles) away.
Earlier on Friday, Qidra said ambulances would send critically injured Palestinians who urgently need to be taken to Egypt to be treated from besieged Gaza City to the south of the enclave.
The IDF, which previously said it would look into reports about this ambulance attack, accused Hamas of transferring both militants and weapons in ambulances.
The military said in a statement on Friday night: "We intend to release additional information. More detailed information was shared with intelligence agencies who we work with. We have information which demonstrates that Hamas' method of operation is to transfer terror operatives and weapons in ambulances."We emphasize that this area is a battle zone. Civilians in the area are repeatedly called upon to evacuate southwards for their own safety."
World Health Organisation Director-General Tedros Adhanom Ghebreyesus said in a social media post he was "utterly shocked by reports of attacks on ambulances evacuating patients", adding that patients, health workers and medical facilities must be protected.
Israel, which has accused Hamas of concealing command centres and tunnel entrances in al-Shifa hospital, ordered all civilians to leave the north of Gaza last month and its military encircled the area on Thursday.
Despite its order for civilians to leave northern areas of Gaza, Israel's military has continued to bombard the south of the strip as well.
Hamas and al-Shifa hospital authorities have denied the facility is used as a base by militant fighters.
It comes as concerns of the humanitarian crisis in Gaza grow around the world.
More than 3,700 Palestinian children have been killed in 25 days of fighting, according to Hamas officials.
Bombardment has driven more than half the territory's 2.3 million people from their homes while food, water and fuel are running low and overwhelmed hospitals warn they are on the verge of collapse.
Israel has allowed more than 260 trucks carrying food and medicine into Gaza, but aid workers say it's not nearly enough. Israeli authorities have refused to allow fuel in, saying Hamas is hoarding fuel for military use and would steal new supplies.
Israeli Prime Minister Benjamin Netanyahu again ruled out a ceasefire on Friday, after US Secretary of State Antony Blinken urged him to ensure more humanitarian aid and do more to protect Palestinian civilians in Gaza or else there will be "no partners for peace".
He reiterated US support for Israel, saying it has the right to defend itself. But he added that a "humanitarian pause" was needed to boost aid deliveries to Palestinian civilians.
Netanyahu said Israel "refuses a temporary ceasefire that doesn't include a return of our hostages," referring to some 240 people Hamas abducted during its attack. He said Israel was pressing ahead with its military offensive with "all of its power."
It comes as fears of the conflict becoming a regional one grow with Lebanon's Hezbollah leader Hassan Nasrallah's defiant speech on Friday.
He stopped short of announcing that Hezbollah is fully engaging in the war but said his fighters would "not be limited" to the unprecedented fighting which has taken place between Israel and Lebanon over the past few weeks.
Nasrallah also said his militia is not deterred by US warnings, saying: "Your fleets in the Mediterranean...will not scare us."
This was seemingly a response to Blinken saying the US, which has deployed aircraft carriers and other forces in the eastern Mediterranean, was committed to ensuring that no "second or third front" opens in the conflict.