A spokesman for Hamas in Gaza, Mushir al-Masri, told Aljazeera that Israeli Prime Minister Ariel Sharon's warning will "never frighten Hamas".
"The Palestinian people have two options, either to surrender or resist," he said.
"I think our people have chosen to continue resisting."
His comments came after Sharon ordered the army to hunt down Palestinian resistance fighters and vowed to resume the Israeli campaign to assassinate Hamas leaders.
Israel killed two top Hamas leaders, Shaikh Ahmad Yasin and Abd al-Aziz al-Rantisi, in Gaza missile strikes in March and April respectively.
Earlier on Wednesday, the Israeli army destroyed the West Bank home of one of two Palestinian bombers reportedly responsible for Tuesday's twin bus bombings, which killed 16 and wounded 100.
"We will fight this terror with all our might," Sharon told reporters after the attacks in the southern city of Beir al-Saba.
Security sources declined to reveal details of the decisions taken in the late-night security meeting on Tuesday other than to say "the policy now is to hit Hamas leaders wherever they are".
Israel assassinated Hamas leader
Shaikh Ahmad Yasin in March
But the Hamas spokesman warned "all Zionist people" that Sharon "is dragging all of them down into the abyss", by committing his crimes.
"Be careful. Our Palestinian people want to live in security and stability but you are occupying our land and attacking our holy sites."
On Wednesday morning, Israeli occupation soldiers blew up the first floor of a two-storey home where one of the bombers, Ahmad Abd al-Afu al-Qawasmi, 22, lived in the West Bank city of Hebron, witnesses said.
The family of the second bomber, Nasim al-Jabari, also 22, was told to move out their belongings, apparently in preparation for it to be destroyed as well, they added.
The Israeli army confirmed the home had been destroyed. A spokeswoman said the routine response to bombings was a message "that anyone who is party to terrorism will pay a price".
Destruction of Palestinian homes
is considered a 'routine response'
Occupation officials added that 12 Palestinians were arrested in Hebron and several others in Bethlehem, also in the West Bank overnight.
Also in response to the bombings, Sharon has called for work on the separation barrier to begin in the area bordering southern Israel.
Israel says the barrier is necessary for "security reasons". Palestinians denounce it as a land grab, effectively carving up whole villages and farmland. The World Court has ruled that the barrier is illegal.