The Israeli military said on Monday it had launched an "aerial strike", which targeted a vehicle carrying a senior member of Islamic Jihad in the Jabalya refugee camp.
The army said: "The terrorist had been involved in numerous projectile rocket attacks against Israel in the past few weeks."
Fighting has increased in the Gaza Strip since Israel withdrew from the occupied territory in September. The surge in fighting could delay a Palestinian parliamentary election which is due to take place on 25 January.
Israel in the past has targeted members of Islamic Jihad, which is sworn to Israel's destruction. Khalid al-Batsh, a senior Islamic Jihad political leader, vowed revenge.
"The crime will not pass and the occupation should be prepared for reactions from the Islamic Jihad armed wing," he said.
Palestinians on a car damaged
in an Israeli strike in Gaza
One of the two assassinated men, Said Abu al-Jidian, was a senior commander of Islamic Jihad's armed wing in northern Gaza. The other, Akram Qadas, also belonged to its armed wing.
Medics said a third member who was travelling in the car was critically wounded.
Rockets were fired towards Israeli territory from the Gaza Strip overnight, without causing any casualties or damage, an Israeli military spokesman said on Tuesday.
The homemade rockets were launched from the northern Gaza Strip towards the town of Sderot, where an alert system is in place, the spokesman told AFP.
Islamic Jihad and two Fatah factions have claimed responsibility for firing the rockets.
Islamic Jihad's al-Quds Brigades issued a statement saying it fired 14 rockets at Israeli targets in retaliation for the air strike in Jabalya.
"The crime will not pass and the occupation should be prepared for reactions from the Islamic Jihad"
Khalid al-Batsh, senior political leader, Islamic Jihad
Fatah's Abu al-Rish Brigades said it fired on the Sderot settlement, north of the Gaza Strip, in retaliation for the Israeli escalation.
Israel has shelled the northern Gaza Strip in recent days to enforce a "no-go" zone it says is aimed at stopping cross-border rocket fire by resistance fighters, which has been condemned by the Palestinian Authority.
The Israeli military says there is no plan for ground forces to re-enter Gaza. The aim is to step up air attacks and shelling from land and sea, but that has so far done little to stop the firing of rockets into Israel.