Israel says its fighter jets have hit dozens of Palestinian militant targets overnight in Gaza after militants fired 370 rockets at Israel.
At least three Palestinians died in the strikes on Gaza, while a civilian was killed in a rocket attack in the Israeli town of Ashkelon.
Both Israel and Hamas, which rules the Gaza Strip, have threatened to escalate their actions.
Violence erupted when a covert Israeli mission got exposed in Gaza on Sunday.
Seven Palestinian militants, including a Hamas military commander, were killed during the incident, including a member of the Israeli undercover unit.
How serious is the upsurge?
After a brief lull following Sunday night’s violence, a barrage of rockets was launched towards Israel late on Monday. A bus, which had reportedly been carrying troops, was hit by an anti-tank missile in a kibbutz, seriously wounding a male soldier.
Overnight rockets hit border communities, including the city of Ashkelon several miles north of Gaza, where a building was struck, killing a civilian and seriously wounding another.
Israel carried out waves of air strikes against Hamas and the smaller Palestinian Islamic Jihad faction across the Gaza Strip.