Israeli Prime Minister Ehud Olmert expressed sorrow over the incident, but maintained that Israeli forces were responding to militant fire near the compound.
UNRWA Director John Ging denied there were any militants at the compound, and also said that at the time there was no fighting in the area.
Ging said UNRWA's headquarters -- located in a densely populated neighborhood -- was hit repeatedly by shrapnel and artillery, including white phosphorus shells -- the use of which is restricted under international law.
"It looks like phosphorus, it smells like phosphorus and it's burning like phosphorus," Ging said. "That's why I'm calling it phosphorus."
Some 700 Palestinians were taking shelter in the compound at the time.
Ging said that Olmert apologized to Ban over the incident.
There was no immediate comment from the Israeli military on the allegation of the use of white phosphorous, but Israeli spokesman Regev said Hamas recently fired phosphorus shells at Israelis.
In addition, the Foreign Press Association said international news agency offices in Gaza City were hit by Israeli fire Thursday and demanded Israel stop shooting at the building that houses them.
Palestinian security sources said two employees for Abu Dhabi television were wounded in the incident.
As it stepped up its military campaign, Israel on Thursday also dispatched senior Defense Ministry official Amos Gilad to Cairo to discuss a cease-fire proposal.
A Hamas delegation is also in the Egyptian capital, talking with leaders there who are trying to hammer out a temporary truce.
Israel said it initiated the operation into Gaza -- which is controlled by Hamas -- to stop rocket fire on its southern cities and towns.
Thirteen Israelis, including 10 soldiers, have died in the operation in Gaza and from rocket strikes on southern Israel, according to the Israeli military.
More than 1,000 Palestinians have been killed, including many civilians, Palestinian medics said. (CNN)
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