A general view of the damage caused to a building at the site of an explosion in Tel-Aviv, Israel, on Friday. Reuters

Israel threatened reprisals on Friday after a drone claimed by Yemen's Houthi rebels penetrated its vaunted air defences and killed a civilian in a Tel Aviv apartment building near a US embassy annexe.

The attack drew condemnation from UN chief Antonio Guterres and an appeal for "maximum restraint" to avoid "further escalation in the region".

The pre-dawn strike came hours before Israel suffered another blow, a ruling by the UN's top court that its occupation of the Palestinian territories was "illegal" and needed to end as soon as possible.

The advisory opinion of The Hague-based International Court of Justice is not binding, but it comes amid mounting international condemnation of Israel's handling of its war on Hamas in Gaza.

The office of Palestinian president Mahmud Abbas hailed the court's decision as "a victory for justice". Hamas said it puts "the international system before the imperative of immediate action to end the occupation".

But Israeli Prime Minister Benjamin Netanyahu, who has overseen a major expansion of Jewish settlements in the occupied West Bank, insisted: "The Jewish people are not occupiers in their own land."

The Houthis are one of a number of Iran-backed armed groups around the Middle East that have claimed drone and missile attacks on Israel in retaliation for the Gaza war.

Investigators examine the site of an explosion in Tel Aviv, Israel, on Friday. Reuters

The group, which controls swathes of Yemen, including much of its Red Sea coast, has previously claimed attacks on Israeli cities including Ashdod, Haifa and Eilat, but Friday's strike appears to be the first to breach Israel's sophisticated air defences.

The Houthis fired at Tel Aviv a "new drone called 'Yafa', which is capable of bypassing the enemy's interception systems", their spokesman Yahya Saree said.

An Israeli military official, who spoke on condition of anonymity, said a "very big drone that can travel long distances" was used in the 3:12 am (0012 GMT) attack.

He said the drone was detected but due to "human error" the alarm was not raised in time, and it slammed into an apartment building.

Emergency personnel inspect debris at the site of an explosion in Tel Aviv, Israel, on Friday. Reuters

Military spokesman Daniel Hagari said Israel believed the drone used was Iranian-made and upgraded so it could reach Tel Aviv from Yemen — at least 1,800 kilometres (1,100 miles) away.

Medical services said one civilian was killed and four people suffered "relatively minor" injuries.

Defence Minister Yoav Gallant vowed revenge.

"The security system will settle the score with all who try to harm the state of Israel, or sends terrorism against it, in a decisive and surprising manner," he said in comments posted on social media platform X.

Reuters