Israel has expressed regret for the civilian deaths and says it is investigating the incident.
Palestinian leaders have called for an emergency UN Security Council meeting to force Israel to stop military raids.
The Palestinian prime minister, Hamas's Ismail Haniya, denounced the Israeli attack as an "awful massacre" and said talks on forming Palestinian unity government would be suspended.
Town stunned by shelling
Israeli Defence Minister Amir Peretz ordered the halt in artillery attacks and called for an urgent inquiry into the incident.
Prime Minister Ehud Olmert expressed regret over the killings and offered humanitarian assistance to the wounded.
Palestinian hospital officials said 13 of the dead belonged to the same family, and two of them were women and six were children.
The Israelis withdrew from the town on Tuesday following a major offensive centred in Beit Hanoun.
More than 60 Palestinians and an Israeli soldier were killed in a week-long operation that Israel says was aimed at stopping militant rocket fire into Israel from Gaza.
National morning
TV footage from Beit Hanoun showed the victims being taken to hospital in their sleeping clothes, some with terrible injuries.
Relatives identify the dead from Israeli shelling Many of the dead were members of the same family
"It is the saddest scene and images I have ever seen. We saw legs, we saw heads, we saw hands scattered in the street," 22-year-old eyewitness Attaf Hamad told Reuters news agency.
"I saw people coming out of a house covered in blood. I started screaming to wake up the neighbours."
Palestinian leaders announced three days of national mourning throughout the West Bank and Gaza Strip.
A local Hamas leader has called for the group to resume suicide bombings inside Israel, a policy suspended two years ago by the main militant faction.
"Israel should be wiped from the face of the Earth. It is an animal state that recognises no human worth. It is a cancer that should be eradicated," said Ghazi Hamad, a spokesman for the Hamas-led government.
Shots have also been fired at the European Union office in Gaza City in an apparent retaliation, Palestinian authorities said.
Gaza map showing Beit Hanoun
Unidentified gunmen opened fire on the building and youths threw stones, Palestinian sources reported, adding no-one was injured in the attack.
Israeli forces also killed a 17-year-old civilian near Jabaliya refugee camp, hospital officials in Gaza said.
Earlier, in a separate incident, five Palestinians were killed in an Israeli army raid near the West Bank town of Jenin.
They were said to be members of the al-Aqsa Martyrs' Brigades, an armed offshoot of Palestinian Authority President Mahmoud Abbas' Fatah movement.
The Israeli army said it had found large quantities of arms during its six-day operation throughout Beit Hanoun which ended 24 hours earlier.
But rocket attacks have continued to hit Israel. Following the Beit Hanoun deaths, militants fired rockets the nearby border town of Sderot, causing minor wounds to an Israeli woman.