Islamic Jihad said five more men trapped in the tunnel were dead, naming them. Israel had on Monday carried out a "controlled" explosion on the tunnel crossing the border.
"We announce the death of five new heroes of the Jerusalem Brigades in Zionist bombing," Islamic Jihad said in a statement, referring to its military wing.
Two of the 12 dead belonged to the militant wing of Hamas, the Islamist group that controls Gaza, with the other 10 from Islamic Jihad.
The International Committee of the Red Cross had asked Israel to enable searches in the tunnel, according to a statement yesterday from COGAT, the defence ministry unit which liaises with the Palestinian territories.
COGAT commander Yoav Mordechai told the head of ICRC in Israel that the Israeli authorities would "not enable searches in the security perimeter in the Gaza Strip, without progress on the issue of the Israeli captives and missing soldiers."
Israel is seeking the return of two civilians as well as the bodies of two soldiers, believed to have been killed in the 2014 war in Gaza.
In 2011 Israel freed more than 1,000 Palestinian prisoners in exchange for an Israeli soldier who had been held captive for five years.
Tunnels dug by Hamas were a key issue in the last war with Israel in 2014, but discoveries of those stretching into the Jewish state have since been rare.
The two have fought three wars since 2008, while the Jewish state maintains a crippling blockade of Gaza which it says is necessary to constrain Hamas.
The Israeli army said the tunnel blown up on Monday crossed the border from Gaza into Israel and was detected around two kilometres (less than two miles) from the Israeli village of Kissufim.
Israel launched its 2014 operation in Gaza with the stated objectives of halting rocket fire and destroying attack tunnels into Israel.
During the war, 32 tunnels were discovered, including 14 that extended into Israel, according to a UN report on the conflict.
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