JERUSALEM, OCT. 7 -- Four Palestinians and an Israeli Shin Bet security agent were killed last night in a shoot-out in the Israeli-occupied Gaza Strip, the Army said today. It was the largest of a series of recent security-related incidents here.

Two of the dead Palestinians had escaped from an Israeli jail last May and Army officials said they and their companions were on their way to a terrorist attack in Israel when their heavily armed vehicles were stopped by an Israeli patrol.

The incident occurred near a main intersection in Gaza City about 9:30 p.m. when the joint patrol of security agents and soldiers sought to question the occupants of what they considered a suspicious-looking car, Maj. Gen. Yitzhak Mordechai, commander of the southern region, said at a press conference.

One of the passengers opened fire with a machine gun, killing Shin Bet agent Victor Arjouan of Beersheba, Mordechai said. The Israelis then opened fire, killing three men.

A second car that appeared to be trailing the first attempted to flee, according to Mordechai. He said soldiers opened fire after its driver refused commands to halt and the driver was killed instantly.

After the incident, soldiers found four assault rifles, two pistols, a grenade and 25 magazines of ammunition in the men's possession, an Army statement said -- the largest cache discovered in this area in recent memory. A curfew was imposed on the area and an unspecified number of Arab residents were arrested.

"In my opinion, the amount of materials and the nature of the group indicated they were on their way to carry out an attack. The clash prevented them from being able to carry it out and endangering lives," Mordechai said. He also said investigators had found a photograph of the four men wearing their weapons in an apartment belonging to one of them.

The Army did not identify the four Palestinians but said two of them were members of Islamic Jihad, a Shiite Moslem group that has been blamed by western intelligence agencies for several major acts of terrorism.

The other two were part of a group of six prisoners who escaped May 18 from a jail in Gaza City. Two of the escapees were recaptured recently and the rest remain at large.

The six, all of whom were convicted of belonging to the Palestine Liberation Organization, which is banned in Israel, sawed through iron bars and climbed over a wall to escape. Some were serving terms for murder, arms smuggling and throwing gasoline bombs, authorities said.

It was the second major incident in less than a week in Gaza. On Oct. 1, three Palestinians were shot dead by soldiers after their car crashed through a roadblock at the entrance to a refugee camp. The men had left the car and attempted to flee by foot, according to the Army, and were shot after being ordered to halt.

Late last month an Israeli reservist was stabbed to death in the northern Galilee region, allegedly by an Arab from nearby Jenin in the occupied West Bank. Earlier in the month police said they had foiled a plot to plant a car bomb in front of government office buildings in Jerusalem.

The incidents led Trade and Industry Minister Ariel Sharon, a former defense minister, to charge that Israel's coalition government was lax on security matters. "Jews are being murdered all over the country and nothing is being done about it," Sharon told reporters.

Sharon came under attack from leaders of the rival Labor Party, whom he had blamed for the situation, and he received little support from Prime Minister Yitzhak Shamir, head of Sharon's own Likud bloc, who praised Israeli security forces for foiling potential terrorist operations.