An Israeli court on Tuesday cleared the military of any responsibility for the death of US activist Rachel Corrie who was killed by an army bulldozer in 2003, rejecting a civil suit filed by the family.

The family said they were "deeply saddened and deeply troubled" by the verdict, with their lawyer vowing to press ahead with an appeal after a legal battle which has lasted nearly 30 months.

"I reached the conclusion that there was no negligence on the part of the bulldozer driver," said Judge Oded Gershon, reading out a summary of his verdict at Haifa District Court in northern Israel.

He said Corrie's death was the result of an accident, and that the 2003 military police investigation -- which found she had been killed by falling earth as a result of her own irresponsible behaviour -- had been properly conducted.

"The deceased put herself into a dangerous situation, she stood in front of a giant bulldozer in a place where the operator could not see her. She did not distance herself as a reasonable person would have done," he said.

"Her death is the result an accident she bought upon herself."

According to eyewitness accounts, the 23-year-old was killed by a military bulldozer in Rafah in the southern Gaza Strip on March 16, 2003.

At the time, she was acting as a human shield with a group of pro-Palestinian activists from the International Solidarity Movement to prevent troops from demolishing a house.

The verdict echoed the findings of an internal investigation by the Israeli military which was concluded just four weeks after her death and cleared troops of any responsibility in the matter, saying the bulldozer crew could not see Corrie because she was behind a mound of rubble.

The Corries' lawyer Hussein Abu said the family would appeal to the Supreme Court.

"The verdict is based upon distorted facts and could have been written by the state's attorney," he told reporters as her father Craig stood by stony-faced, her mother Cindy looking heartbroken and close to tears, an AFP correspondent said.

Cindy Corrie said the family was "deeply saddened and deeply troubled" over the verdict.

"We believe that Rachel's death could and should have been avoided," said the white-haired American, her voice breaking with emotion. "We knew from the beginning that a civil suit would be an uphill battle."

Israel, she said, operated "a well-heeled system to protect the military."

"This was a bad day, not only for the family, but a bad day for human rights, for humanity, for the rule of law and for the country of Israel," she said.

Craig Corrie, a veteran of the Vietnam War, said it was clear from testimony of senior military officers that they believed troops could kill people in southern Gaza "with impunity."

"We've seen from the highest levels of the military that they thought they could kill people on that border with impunity," he said.

In March 2010, the family launched the civil action for negligence against the state of Israel and the defence ministry for a symbolic sum of $1, plus costs.

They had earlier tried to sue Caterpillar, the bulldozer's US manufacturers, for liability but the action failed.

In its 2003 ruling, the military said Corrie had been killed by falling earth and building materials as a result of her own negligence.

"The death of Ms. Corrie was not caused as a result of a direct action by the bulldozer or by its running her over, but by the falling of earth and building materials that was pushed by the bulldozer," it said at the time.

The army went on to accuse Corrie and other activists from the International Solidarity Movement (ISM) of "illegal and irresponsible behaviour" contributing to her death.

But activists who were with her at the time said she was visible to the driver.

According to an account published two days after her death by activist Tom Dale, who witnessed the incident from 10 metres away, Corrie was clearly visible.

"The bulldozer drove toward Rachel slowly, gathering earth in its scoop as it went. She knelt there, she did not move. The bulldozer reached her and she began to stand up, climbing onto the mound of earth. She appeared to be looking into the cockpit.

"They pushed Rachel, first beneath the scoop, then beneath the blade, then continued till her body was beneath the cockpit. They waited over her for a few seconds, before reversing. They reversed with the blade pressed down, so it scraped over her body a second time. Every second I believed they would stop but they never did."

Corrie was killed at the height of the second intifada, or uprising (2000-2005) and quickly became an symbol of foreign support for the Palestinian cause and the subject of a 2005 play based on her emails and diary.