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UN chief Ban Ki-moon slammed Israel's blockade of the Gaza Strip during a tour of the war-battered coastal territory on Sunday, saying it was causing "unacceptable sufferings."

"I have repeatedly made it quite clear to Israel's leaders that the Israeli policy of closure is not sustainable and that it's wrong," Ban told reporters in the southern Gaza Strip town of Khan Yunis.

"It causes unacceptable sufferings to... the people and population" of Gaza, he said, adding he was saddened to see that teenagers and children were the worst affected.

"This policy is also counter-productive. It prevents legitimate commerce and encourages smuggling. It undercuts moderates and empowers extremists."

The UN chief crossed into the Hamas-run territory earlier Sunday, expressing solidarity with the plight of the Palestinians and urging Israel to end its tight blockade.

This was his second visit to the impoverished Gaza Strip since Israel's 22-day offensive on Gaza aimed at halting rocket fire ended in January 2009.

Ban toured some of the hardest-hit areas of Gaza before inaugurating projects to build 150 homes, a flour mill and a sewage treatment plant, which he said were approved by Israel in recent days.

However, Ban said more reconstruction was needed, calling the projects a "drop in the bucket."

"I have seen much damage (to many) houses, it is quite distressing," he said.

In the occupied West Bank on Saturday, the UN Secretary General had said his visit to Gaza was to show support for Palestinians.

"I'll go to Gaza... to express my solidarity with the plight of the Palestinian people there and to underscore the need to end the blockade," Ban told reporters.

He said in Khan Yunis that "the United Nations will stand with you through this ordeal" and continue to deliver humanitarian aid.

But he also urged all Gazans "to choose the path of non-violence... and international legitimacy."

Ban had insisted ahead of a meeting with Israeli President Shimon Peres on Saturday that the closures imposed "unacceptable hardships" on civilians.

"I understand and share Israel's concerns about the challenges posed by Hamas, but Israel's blockade continues to impose unacceptable hardships while empowering extremists," he said.

"I am confident the blockade can be lifted while addressing Israel's legitimate security concerns."

Gaza's borders have been mostly quiet since the end of the war, in which some 1,400 Palestinians and 13 Israelis were killed, but the closures have prevented the rebuilding of thousands of homes that were damaged or destroyed.

The military offensive in December 2008 and January 2009 largely succeeded in halting near-daily rocket attacks that were rarely lethal but left Israelis living near Gaza's borders in a constant state of fear.

However, in the past three days several rockets have slammed into Israel, with one killing a Thai labourer -- the first casualty of the rocket attacks since the fighting was ended by unilateral ceasefires.

Hamas has taken steps to rein in the rocket fire since the war, and the deadly attack was claimed by a radical Al-Qaeda-inspired group which has clashed with Hamas in the past.

Ban's visit is part of a two-day regional tour in which he encouraged Israeli and Palestinian leaders to revive the peace process.

"I will do my best to resume talks," he said in Khan Yunis.

Earlier this month the Palestinians grudgingly agreed to indirect talks with Israel after months of US shuttle diplomacy, but progress stalled two days later when Israel announced plans for 1,600 settler homes in east Jerusalem.

The Palestinians have refused to hold direct negotiations unless Israel halts settlement construction in the occupied West Bank and east Jerusalem, which they view as the capital of their future state.

Ban's visit came on the heels of a statement by the Middle East diplomatic Quartet -- the United States, United Nations, European Union and Russia -- calling for a return to talks and a final peace deal within two years.

AFP