In Rafah, the children have grown so used to the sound of gunfire they can't sleep without it

We were sitting in the Asfuls' front room. Suddenly the two tanks at the end of the street opened up their machine-guns. The bullets were flying so close to the house we could see the tracer fire slapping straight past the windows. To leave without crossing the line of fire would be impossible. All we could do was sit and hope the bullets did not come through the window.

They had done in the past. The wall behind the sofa where Jihan Asful and her sister were sitting was peppered with bullet holes. One, right above Jihan's head, had punched its way through the concrete wall behind her and into the next room. But she didn't flinch, she just sat there drinking her tea and nibbling on a biscuit. "It happens every night," she smiled. "This is our life."

The children were happily playing in the next room, despite the heavy-calibre bullets flying past within a few feet of them. The death rattle of the guns didn't seem to bother them. One of the women said they had to change the glass in the windows every week. Just going to the bathroom meant taking your life in your hands, walking within inches of the line of fire.

All day the Palestinians had been telling us that the Israeli soldiers routinely fired into the civilian houses of Rafah's poor neighbourhoods. Perhaps the bullet holes sprayed across the fronts of the houses should have been proof enough. Or the gaping holes from a rocket or a tank shell.

Rafah is at the southern end of the Gaza Strip, up tight against the Egyptian border. The city is ringed with dirt-poor refugee camps that are built next to the Egyptian border, or the Jewish settlements that close off Rafah from the sea. These are the houses that come under fire almost nightly from soldiers guarding the border or the settlements.

The Israeli army says Palestinian militants fire on its soldiers, who are only returning fire. It is true Palestinian militants do shoot at the soldiers at times. The Asfuls and other Palestinians in Rafah claim that it is not always the case. They say that often the soldiers fire unprovoked.

On the night I was there all the shooting appeared to be coming from one direction. There was no sign of any militants in the area – but pinned down inside that was hard to verify. There were no militants inside the Asfuls' house. What is beyond dispute is that the Israeli fire does come into civilian houses.

Why didn't the Asfuls move? "There are 18 of us in the family," said Jihan's brother – her father is dead. "Where can I move them to out of this neighbourhood? Where can I find room for them?" The Asfuls are too poor to rent. The house they live in, riddled with bullet holes, is worthless.

We were pinned down for half an hour. Eventually, after a lull in the shooting, we decided to risk leaving. It was a nerve-racking dash down the stairs and out the door into the pitch dark, then a sprint down a dark alley to profound gratitude around the corner, safe from the bullets. But for the Asfuls there was no safety waiting round the corner. That room with the bullets cracking past is their home. As Jihan put it: "This is life in Rafah."

Outside, two children had been wounded by the gunfire.Yasmin al-Salaq, 13, was hit in the head by shrapnel. Her sister Sawsan, 15, was in serious condition. She had been hit by a bullet in the chest and was taken to the better-equipped hospital, north in Gaza City. We saw them wheel her out to the ambulance, deathly pale.

Stories of civilians being killed pour out of Rafah, turning up on the news wires in Jerusalem almost every week. The latest, an 11-year-old girl shot as she walked home from school on Saturday.

The claims cannot be verified without coming here, an arduous journey through Israeli army checkpoints that can close without warning for hours at a time, leaving you stranded. Of all the hells the violence here has created, Rafah is one of the worst. The United Nations will not allow its international staff to stay here overnight, so dangerous is the town considered.

It is bad even by day. The narrow alleys of the refugee camps near the Egyptian border are frightening places, the houses riddled with bullet holes. Turning the corner without checking with the inhabitants is dangerous.

What terrifies the inhabitants of Rafah most are the towers, tall Israeli observation posts built close to the border. Nobody likes to be within sight of the towers – if you can be seen, they reason, you are in the potential line of fire.

Fawziya abu Libda's house is opposite one of the towers. It is worse than the Asfuls'. There was not a single room without bullet holes in the walls. "And this is where the bullet went over my shoulder when I was cooking," the old woman said. And in the next room: "This is where the bullet went behind me when I was praying."

There is nowhere in the house to shelter. "I've given up getting on the floor when the shooting starts," she said. "It can happen any time, day or night."

Ms abu Libda lives here with her children and grandchildren. They are waiting for the house to be demolished, she says. Gradually, the Israeli army is bulldozing the houses here because, it says, militants use them to shoot at army positions, which is probably true. The Red Cross has given the abu Libdas tents, ready for the day their bullet-perforated house is torn down.

At night, life is worse. Darkness was beginning to fall when we got pinned down in the Asfuls' house. The sound of gunfire echoes over the city all night. The people of Rafah joke that they are so used to it they can't sleep without it.

Such is the danger on the streets at night, only the ambulances venture out. I rode with the paramedics. Even with the red lights flashing, they get nervous passing the observation towers.

There was a bullet hole in the back of the ambulance. Fatthi al-Derbi, one of the paramedics, said the ambulance was shot at when he went to Block O, a section of one of the refugee camps Israeli soldiers had fired on. The bullet that hit the ambulance grazed an oxygen cylinder. The paramedics say they are frequently fired at in Rafah. Several have been injured.

In Block O, the locals said the soldiers fired tank shells on that occasion. Five people were killed, they said, including an eight-year-old girl, Shaima abu Shamaaleh. Her father showed us pictures of her on a hospital bed, her eyes torn out of her face. They also had pictures of a severed adult head and torso lying in the middle of the street.

That night, we fell asleep to the sound of the guns.