Zeev Boin said the sheikh "deserves to die, and I would advise him to go underground," army radio reported on Friday.
The radio and Israeli newspapers said the military believes that Yasin, who was already unsuccessfully targeted by Israel's army, had personally ordered the bombing on Wednesday that killed four Israelis at the Erez crossing point from Gaza.
However, Yasin on Friday denied any direct involvement with Hamas attacks. The Israelis "know that Sheikh Yasin has nothing to do with military action, but they are seeking a pretext to reassure their people and cover up their failure."
"Death threats do not frighten us, because we are in search of martyrdom," he added.
On its part, the Palestinian Authority warned Israel against resuming targeted killings of Palestinian resistance fighters.
Nabil Abu Rudeina, chief advisor to Palestinian leader Yasir
Arafat, told AFP: "A resumption of the policy of liquidation will
put back the region on square zero and will lead to an escalation."
The last targeted killing attempt against a Hamas official was
on 10 September when Mahmud al-Zahar was wounded in an Israeli air strike on his house that left two other Palestinians dead.
Meanwhile, a close advisor to Defense Minister Shaul Mofaz, reserve General Amos Gilad, would not be drawn when asked by the radio whether Yasin was now a target for assassination.
"Death threats do not frighten us, because we are in search of martyrdom"
Sheikh Ahmad Yasin
"We should never announce in advance what our intentions are," Gilad said, branding Yasin as the "supreme leader of crime".
"We will use all means necessary to attack terrorism," the general said, while attributing the relative calm in the Palestinian uprising last month to the fact that Hamas' leadership had been "partly liquidated".
Sheikh Yasin was lightly wounded on 6 September when Israeli warplanes targeted an apartment he was visiting in Gaza City along with other Hamas officials.
Also on Friday, Israeli troops arrested 10 Palestinians in the Gaza Strip overnight. Five of them were nabbed in Ramallah, three in Nablus and two near Hebron.
Hamas took responsibility for
the Erez attack that killed four
Meanwhile, Israel kept the door shut at the Erez crossing. As a result, 4000 Palestinians who work at a nearby industrial estate were still unable to reach their jobs.
Military sources said the crossing will remain closed until after the building is repaired and more effective security measures are put in place.