Medics said the Israeli air strike on a tent encampment of displaced families in the Mawasi area of Khan Younis, in the south of the enclave, had killed six-year-old Mennatallah Abu Libda and a 31-year-old woman, Hanan Mahmoud.
The attack was carried out by two helicopters, witnesses said.
The Israeli military told Reuters it had struck militants in the area but provided no further information.
Relatives of the victims arrived at the hospital to bid farewell.
Men and women who were related to the dead girl wept beside her white-shrouded body.
"This little girl, a little bird from the birds of paradise, was playing at the door of her home," said the dead girl's grandmother Soheir Abu Libda.
An October ceasefire, brokered by US President Donald Trump, has failed to halt Israeli attacks in the Gaza Strip, with Israel and Hamas deadlocked in indirect talks over implementing the second phase of the deal, which includes the militant group's disarmament and Israeli army withdrawals.
The ceasefire left Israel in control of more than half of the enclave, with Hamas controlling a sliver of territory along the coast.
About 900 Palestinians have been killed in Israeli strikes since the truce came into effect, according to figures from Gazan health officials that do not distinguish between combatants and civilians.
Four Israeli soldiers have been killed by militants during the same period, the country's military has said.
"There is no ceasefire, nothing at all. It's all just deceiving people, nothing more and nothing less," said Khader Abu Libda, a relative of the dead girl, during the funeral procession.
Later on Monday, the Israeli military said in a statement it had killed Mohammad Abu Mallouh, a senior armed Hamas militant in an air strike on Sunday, adding he was a key member of the group's weapons production department.
It said that Abu Mallouh helped to produce weapons that posed threats to its forces operating in the enclave and beyond, including to civilians inside Israel.
There was no immediate Hamas comment on the Israeli military statement.
On Sunday, Palestinian health officials said Abu Mallouh, his wife and their six-month-old child were killed in an Israeli air strike on their apartment in the Nuseirat refugee camp in the central Gaza Strip.
Hamas does not disclose figures for casualties among its fighters.
Israel says its post-ceasefire strikes are aimed at preventing attacks or stopping people from approaching its armistice line with Hamas.
