In central Jerusalem, many pedestrians appeared to be ignoring the wailing air-raid sirens.
Israel has staged drills for the last three consecutive years, but this is the first time all members of the public have been asked to enter shelters to practise taking cover.
The national drill aims to simulate simultaneous rocket attacks from Gaza and Lebanon, as well as missile strikes from Syria and Iran.
It also includes a simulated wave of suicide bombings and tests the way rescue services deal with conventional, chemical and biological strikes against large population centres.
Later in the week, soldiers, emergency crews and civilians will rehearse natural disasters and chemical spills.
Al Jazeera's Sherine Tadros, reporting from Beersheva, where some of the drills were taking place, said there has been criticism from rights groups inside Israel about the exercises.
"They say it is all part of the militarisation of Israeli society and a way to perpetuate the idea of an ongoing war and ongoing fight that Israel is carrying out against the rest of the world," she said.
"This has been subject to a lot of criticism because it in some way justifies Israel's brutal force and the security measures it takes against the Palestinians."
Israel began its national drills in the aftermath of the July-August 2006 war with Hezbollah in Lebanon, which revealed major weaknesses in how Israel dealt with the rocket attacks on its territory.
This year's exercise falls just days before Lebanon holds a closely-fought election that could see the Hezbollah-led opposition become the new government, and comes in the wake of rising tensions between Israel and Iran.
The drill also coincides with a planned regional tour by Barack Obama, the US president, who has recently pressured Israel to stop settlement building in an effort to reach an agreement with the Palestinians.
Alastair Crooke, director of the Conflict Forum in Beirut, told Al Jazeera that there is a sense in the Arab world that Israel is looking toward the right for new solutions to its security concerns.
"It's the sense of unwillingness for many Israeli leaders to see a Palestinian state pushed on it, at a time when Hamas is strong and when Hezbollah may be getting stronger - when America may be talking to Syria and talking to Iran at the same time," he said.
"This leaves policy makers in Israel quite nervous and looking for ways to change the political paradigm in a way that will advance the Israeli sense of security."