Dozens more were wounded by the strike in the town of Beit Lahiya on Tuesday, the Gaza health ministry said.
Miller said he could not speak to the specific death toll, but the U.S. was seeking more information. He said it was a "horrifying incident with a horrifying result."
Washington contacted Israeli officials and "made clear we want to know exactly what happened, how you could have a result that produces, according to reports, dozens of children dead, and we don't yet know the answer to that question," Miller said.
The incident was a reminder of why the U.S. wants to see a ceasefire to bring an end to the conflict, he said, arguing that was in Israel's interest.
"It is critically important... that Israel be mindful of achieving a larger strategic success, and that (Israel) be mindful of finding a way to end this campaign in a way that brings the hostages home, in a way that ensures their security, and not just continuing in an endless, perpetual conflict," he added.
The Biden administration earlier this month sent a letter to Israel urging it to take steps in 30 days to improve the humanitarian situation in Gaza or face potential restrictions on U.S. military aid.
The United States has so far not seen enough progress on the points set out in the letter, Miller said.
Miller also said Washington was "deeply troubled" by legislation passed by Israel on Monday banning the U.N. relief agency UNRWA and said there could be consequences under U.S. law and policy if the legislation is implemented.
