At least three Palestinians, including a pregnant woman and her 18-month-old child, were killed by Israeli air attacks and artillery shelling on the besieged Gaza Strip.
Israeli launched more than 140 attacks after about 150 rockets were fired from the coastal enclave, injuring at least six people in Israel.
Israel’s military on Thursday warned Hamas against a further escalation in violence, and Israeli media said officials were considering evacuating residents from areas near the Gaza border.
“The way things continue to play out is significant. Hamas will understand in the coming hours, as in the past months, that this is not the direction it wants to choose,” a senior military official was quoted as saying on the military’s Twitter account.
Military officials were quoted as saying by local media that Israel is close to a military operation in Gaza in which “Hamas will be hit hard.”
Yuval Steinitz, a member of Prime Minister Benjamin Netanyahu’s inner cabinet, told Israel Radio: “We are not eager for war and are not interested in a broader confrontation, but at the same time it could certainly happen because we will not make any concessions to Hamas.”
Israel’s security cabinet will convene at 13:00 GMT to discuss the Gaza escalation.
Abdullatif al-Kanoo, a spokesman for Hamas, said in a Twitter post on Thursday: “In regards to the continuing [Israeli] aggression … the Palestinian resistance is in self-defence and has a duty to respond to the aggression against our people.
“The escalation of the barbaric shelling of Gaza and the deliberate targeting of civilians is premeditated and the occupation will suffer the repercussions and pay a higher price for its crimes.”
The Palestinian news agency WAFA, citing health sources, reported at least 12 Palestinians were wounded in the overnight barrage. A member of Hamas’ armed wing was also killed.
The heavy exchange of fire comes as attempts to secure a ceasefire were reportedly making progress.
Israeli forces said in a statement about 150 rockets were fired from Gaza and at least 25 had been intercepted.
A statement by Hamas’ military force said it was responsible for the rockets. It said the Palestinian “resistance” had fired a large number of projectiles at “enemy positions in the Gaza envelope”.
Sirens sounded in Israeli areas near Gaza, warning residents to seek immediate shelter, the Israeli army said.
Wednesday’s exchange came just a day after two members of the Gaza Strip’s ruling Hamas movement were killed by Israeli fire.
Hamas’ armed wing on Tuesday identified the dead Palestinians as Ahmed Murjan and Abdel-Hafez al-Silawi, both 23 years old, and confirmed they were members of the group.
The Israeli military, apparently referring to the same incident, said it returned fire after soldiers were fired upon from a Hamas post in the northern Gaza Strip, near the border with Israel.
Palestinian sources said it was a drone attack, while the Israeli statement said it was tank fire.
Hamas had warned Israel it would pay for Tuesday’s attack.
The attacks come as the UN and Egypt try to secure a deal between Israel and Hamas for a lasting truce.
Nickolay Mladenov, the UN’s special coordinator for the Middle East peace process, said on Wednesday he was “deeply alarmed by the recent escalation of violence between Gaza and Israel, and particularly by today’s mutiple rockets fired towards communities in southern Israel”.
Al Jazeera’s Andrew Simmons, reporting from Gaza, said the situation was “moving so quickly”.
“There is a lot of alarm among Gazans in the centre of the city,” he said while the attacks were ongoing.
“As for the talks for a ceasefire … an Al Jazeera source in Cairo said Egypt is trying to mediate so that this situation doesn’t escalate any more than it has already.”
More than 160 Palestinians have been killed by Israeli fire since the Great March of Return protests were launched at the end of March. One Israeli soldier was shot dead by a Palestinian sniper. At least 16,000 Palestinians have been wounded, according to health officials in Gaza.
The protests call for Palestinians to be able to return to the land they or their families fled or were expelled from in the 1948 war that established the state of Israel.
Israeli forces have launched three military assaults on the Gaza Strip since 2008.