Israeli military says its "Iron Dome" defense system intercepted 13 rockets fired from Gaza on Wednesday in what appears to be retaliation for Israeli airstrikes that reportedly killed 10, including the commander of the Hamas military wing.
The Israeli military said the some 20 airstrikes were part of a major offensive dubbed "Operation Pillar of Defense," Reuters reports.
"All options are on the table. If necessary, the (Israeli military) is ready to initiate a ground operation in Gaza," it said.
Benjamin Netanyahu says Israel cannot tolerate continued rocket attacks against its citizens. In his first comments since Israel killed the commander of the Hamas military wing, Netanyahu said Israel is "prepared to expand the operation."
Hamas has responded with threats of retaliation.
"The occupation has opened the gates of hell," the armed wing of Hamas reportedly said.
"Israel has declared war on Gaza and they will bear the responsibility for the consequences," Islamic Jihad reportedly said.
Ahmad Jabari, the commander of military wing of Hamas, was the most senior Hamas official to be killed since the last war in Gaza ended in early 2009. He has long topped Israel's most-wanted list, blamed for a string of deadly attacks, including the kidnapping of Israeli soldier Gilad Schalit in 2006.
The offensive followed a weekend exchange of rocket fire from Gaza on southern Israel and Israeli airstrikes. Seven Palestinians were killed and several Israelis were wounded.
The military said its aircraft targeted more than 20 facilities that served as storage or launching sites for rockets. Among the weapons destroyed were rockets that could hit as far as 25 miles into Israel.
Plumes of black smoke wafted into Gaza City's skies following at least five airstrikes there. Sirens blared as people ran in panic in the streets and militants fired angrily into the air. Hamas police cordoned off the area around a hospital where at least one body from the strike was taken. It was draped in a white sheet, with a burnt leg poking out.
Gaza Health Minister Dr. Mufeed Mkhallalati said a total of 10 people were killed, including Jabari, and 45 wounded, 10 of them in critical condition. Among the dead were three civilians, including an 11-month-old and a 6-year-old.
Hamas announced a state of emergency in the territory. It evacuated all its security buildings.
Outside the hospital where Jabari's body was taken, Hamas official Khalil al-Haya eulogized the commander and threatened Israel.
"The battle between us and the occupation is open and it will end only with the liberation of Palestine and Jerusalem," he said.
Thousands of angry Gazans chanted "Retaliation" and "We want you to hit Tel Aviv tonight."
Witnesses said Jabari was traveling in a vehicle in Gaza City when the car exploded. Crowds of people and security personnel rushed to the scene of the strike, trying to put out the fire that had engulfed the car and left it a charred shell. The Israeli military released a grainy, black-and-white video of the airstrike. It shows a sedan moving slowly along a road before exploding in a powerful blast that sent a large piece of the car flying into the air.
"After a couple of days on ongoing rocket attacks toward Israeli civilians, the (Israeli military) chief of staff has authorized to open an operation against terror targets in the Gaza Strip," military spokeswoman Lt. Col. Avital Leibovitch said.
She said Jabari had "a lot of blood of his hands" and that the military chief "authorized different targets" as well.
Dovish Israeli lawmaker Dov Hanin condemned the killing.
"Assassinating leaders is never the solution. In place of the leaders killed, other will grow, and we will only get another cycle of fire and blood," he said.
The assassination threatened to further damage Israel's relations with Egypt, which is governed by Hamas' ideological counterpart, the Muslim Brotherhood.
Egypt recalled its ambassador to Israel in the wake of the Israeli airstrikes.
In a statement read on state TV late Wednesday, spokesman Yasser Ali said that President Mohammed Morsi recalled the ambassador and asked the Arab League's Secretary General to convene an emergency ministerial meeting in the wake of the Gaza violence.
Israel and Egypt signed a peace accord in 1979. Relations, never warm, have deteriorated since longtime Egyptian President Hosni Mubarak was ousted in a popular uprising last year.
The Associated Press contributed to this report.