Residents of the southern Gaza town of Rafah said a series of explosions overnight demolished about 200 metres (yards) of the border wall.
Egyptian riot police sent to reinforce the border mainly stood aside and let the Palestinians through, witnesses said.
Tens of thousands of Palestinians crossed into Egyptian territory, some on donkey carts and carrying luggage to bring consumer goods and fuel back into the coastal territory.
Israel closed its borders with the Hamas-controlled Gaza Strip last week, cutting fuel supplies to the territory's main power plant and petrol stations and stopping aid shipments that include food and other humanitarian supplies.
Israel said the blockade was a bid to make Palestinian militants stop firing rockets into southern Israel. About 250 rockets and mortars were fired at Israel since last week, the Israeli army said.
The European Union and international agencies have called the Israeli measures collective punishment on Gaza's 1.5 million residents.
Israel said the conditions in Gaza never reached crisis level and accused Hamas of exaggerating the impact of closure.
The Jewish state resumed fuel supplies to Gaza on Tuesday, returning electricity to much of the territory that had been plunged into darkness from the blockade.
Gaza has been largely cut-off since the Hamas Islamists routed Palestinian President Mahmoud Abbas's Fatah forces to takeover the territory in June.
STOCKPILING
Residents said members of Hamas and the Popular Resistance Committees were among the gunmen who blew up the border wall.
Hamas official Sami Abu Zuhri denied that Hamas was involved, but said: "It was impossible to prevent the bombing of the border" which reflected the huge pressures on Palestinians under closure in Gaza.
Many of the Palestinians found transport towards the coastal town of El Arish, about 40 km (25 miles) away.
Others stayed in the Egyptian side of Rafah and clamoured to buy petrol, cigarettes, olive oil and other foodstuffs, which have been in short supply in Gaza - cleaning out some shops.
"I have bought everything I need for the house for months. I have bought food, cigarettes and even two gallons of diesel for my car," said Mohammed Saeed, who was pushing a trolley.
Witnesses said Egypt's Central Security force, which carries out crowd control operations, had about 50 trucks in the Rafah area but they had not intervened to stop the Palestinians coming in. Each truck carries up to 30 men.
Egyptian police officers on the ground said they had no comment on the situation.
On Tuesday, gunfire rang out as hundreds of Palestinian protestors clashed with Egyptian policemen in an attempt to force their way into Egypt.
