The rocket, said to be an upgraded version of the home-made Qassam rockets, landed on a strip of beach adjacent to the southern Israeli city.
“It’s the first time that rockets of this type have penetrated Israeli territory so far,” an Israeli army spokesman said.
The Israelis reported no injuries or damage.
The spokesman said the rocket fired from the Gaza Strip fell barely a kilometre from Ashkelon.
Until now, rockets fired by Palestinians had reached Sderot, an Israeli town about 5 km from the Gaza border.
Ashkelon is about 15 km from the Gaza border.
Meanwhile, the US-backed peace road map teetered on the brink of collapse, with both the Palestinian fighters and Israeli hardliners turning down a new ceasefire proposal by the Palestinian Authority.
Dismissing suggestions that a fresh truce was possible if Israel ended its policy of targeted killings and pulled out of occupied towns, Hamas insisted it would carry out attacks on the Jewish state.
“There is no possiblity to talk about this issue now, ” Hamas leader Abd al-Aziz al-Rantissi said.
“The Zionist enemy should pay a high price for their crime,” he added, referring to the recent Israeli assassination of senior Hamas leader, Ismail Abu Shanab.
Israel also rejected the ceasefire proposal, dismissing it as non-serious.
Israeli spokesman Avi Pazner said that peace could have a chance only after the Palestinian Authority disarmed and dismantled resistance groups.
“Only after than can the peace process continue,” he said.
Hamas, too, turned the heat on the Palestinian Authority, cautioning it against playing into Israel’s hands.
Speaking to Aljazeera, spokesman Usama Hamdan said any crackdown by the Authority against Palestinian fighters would only serve the Israeli cause. He said it would also undermine the Authority and bring it into disrepute.