Yitzhak Herzog, the welfare minister, said: "For several hours the security cabinet discussed the very complex security situation in the Gaza Strip and its implications in Egypt's Sinai and in the West Bank.
"The cabinet will be attentive about stopping rocket fire from this territory and weapons smuggling from Sinai"
Yitzhak Herzog, Israel welfare minister
"We devoted considerable attention and a number of analyses during this discussion... The cabinet will be attentive about stopping rocket fire from this territory and weapons smuggling from Sinai," he told local media.
Eli Yishai, the trade minister and a member of the security cabinet, said before the meeting: "We should concentrate on bringing order through targeted killings, the destruction of infrastructure and of military headquarters."
Military officials said about 300 rockets have been fired into Israel since a November ceasefire.
Despite constant aerial surveillance and regular ground incursions into launch areas, the Israeli military has failed to prevent rocket attacks from sites within striking distance.
Benjamin Ben-Eliezer, the national infrastructure minister, said: "It was decided there will be more liquidation fire against terrorists and I think this will limit the damage [on Israel from the rocket attacks]."
The al-Aqsa Martyrs Brigades, affiliated to the Fatah party led by Mahmoud Abbas, the Palestinian president, said it was ordering its Gaza fighters to go on alert over a "threatened" Israeli operation.
Last week Israel's top public watchdog, State Comptroller Micha Lindenstrauss, condemned the army for failing to tackle Palestinian rocket fire from the Gaza Strip.
Armed groups in Gaza fired some 1,025 rockets in 2006, according to Lindenstrauss's report.
Thousands of projectiles have been fired over the past six years, killing 10 people in Israel and causing damage.