Speaking on public radio Sunday, Israel's Defence Minister Shaul Mofaz, blamed Palestinians for failing to control the resistance fighters and hinted Israel would respond appropriately.
"The option of a ground operation by the army in the Gaza Strip exists and we will do it when we judge the moment is right," Mofaz said.
"We are working right now against the Hamas. No members are safe," he added.
The latest threat came amid escalating violence in the region, with the Israelis accusing the Palestinian Authority of failing to tackle the resistance groups.
Since 19 August when an explosion killed 21 bus passengers in Jerusalem, Israel has assassinated ten Hamas activists.
A number of civilians have also died in the Israeli raids, including an eight year old, Aaya Mahmud Fayaad, who was shot dead in central Gaza on Saturday evening.
"The option of a ground operation by the army in the Gaza Strip exists and we will do it when we judge the moment is right"
Israeli Defence Minister
The Israeli atrocity has stoked Palestinian anger, and at Fayaad's funeral on Sunday, they spilled out.
"Sharon is a terrorist who cannot live without seeing the blood of Palestinian children," said mourner Umm Isam.
The girl was killed hours after two activists from Hamas were killed by another Israeli missile attack.
Hamas responded swiftly, firing at an Israeli truck driver in Gaza on Sunday morning.
Palestinian Foreign Minister, Nabil Shaath, warned that the Israeli attacks were "crimes" that would only fuel a cycle of retaliation.
"It's another crime that will lead to more retaliation," Shaath said.
Pressure on EU
Shaath's statements came as EU foreign policy chief Javier Solana was meeting with Israeli Foreign Minister Silvan Shalom and Defence Minister Mofaz in Tel Aviv.
The Israelis are expected to exert pressure on the EU at the meeting to break off ties with Palestinian leader Yasir Arafat.
Meanwhile, Palestinian lawmakers said during the day that they would present proposals at a special parliamentary session to ease the power struggle between President Arafat and Prime Minister Mahmud Abbas.
Palestinian Information Minister, Nabil Amr, said the Palestinian Legislative Council would convene on Thursday.
"We are trying to narrow differences between Arafat and Abbas. We cannot go on with the atmosphere of crisis," Hatem Abdel-Qader, a lawmaker said.
The US and Israel have increasingly sidelined Arafat in favour of the more accommodating Abbas, leading to deep splits in the Palestinian leadership.