Siam was considered among Hamas' top five leaders in Gaza and headed the militant group's powerful Interior Ministry. As interior minister, Siam, 50, oversaw thousands of security agents and was widely feared.
He said the killing of Hamas leaders will not make the militant group budge on its tough stance toward Israel.
"(Israel's) threats will not frighten us. Our leaders have dedicated themselves to the path of martyrdom. Therefore, they don't fear death," Nazzal said by telephone.
Hamas television said Siam's son, brother and his brother's family were also killed.
An Israeli army statement said the house where Siam was staying was hit in an airstrike.
The building in northern Gaza City suburb of Sheik Radwan was flattened in the powerful strike. Palestinian medics said they pulled out the bodies of one man and two children, and that 18 people were wounded. They said they were still searching the rubble. The bomb had dug a huge crater into the sandy ground.
Siam was considered close to Iranian officials, and established Hamas' police force in Gaza. Siam was charismatic and known for using crude, colorful slang to describe his rivals.
He swiftly rose high in Hamas' ranks. He was one of the masterminds of the militant group's violent takeover of the Gaza Strip in June 2007, wresting control of the territory from rival group Fatah.
Siam's police force was grudgingly respected for ending years of lawlessness in the territory. However, human rights groups in Gaza also accused Siam's interior ministry of practicing torture and illegal detention to cower rivals.
The death of the senior Hamas leader is not likely to affect the militant group's ability to attack Israel, but may shake its ability to control security within Gaza.