Israel's air force bombed an Islamic Jihad base in the Hamas-governed Gaza Strip, killing five senior militants and drawing cross-border Palestinian rocket salvoes that killed an Israeli civilian.
The flare-up on Saturday smashed a relative lull in violence that had surrounded an Egyptian-mediated prisoner swap over a week ago between Israel and Islamist Hamas, which is negotiating a power-sharing deal with US-backed Palestinian rivals.
Egyptian officials said Cairo had secured a truce between the Jewish state and the Gaza militants that would take effect early on Sunday.
Saturday's strike on the Islamic Jihad training camp in southern Rafah followed a rocket attack last week which the Israelis blamed on the group. The rocket caused no casualties but landed deep enough to set off sirens on Tel Aviv's outskirts.
Islamic Jihad said one of its commanders, Ahmed Al-Sheikh Khalil, and four comrades who had overseen production of bombs and rockets for the faction were killed in the mid-day strike. Two other fighters were wounded.
Israel's military said its aircraft "targeted a terrorist squad ... that was preparing to launch long-range rockets."
It said in a statement that those hit were responsible for the rocket attack late on Wednesday, though no Palestinian faction had claimed responsibility.
Islamic Jihad, a sometime Hamas ally that has recently chafed at its rule of Gaza, vowed revenge, a call echoed by smaller groups in the territory.
"There is no chance of speaking about a truce now, following such a big crime against leaders of the group," said Islamic Jihad spokesman Abu Ahmed.
By Saturday evening, at least 20 rockets and mortar bombs had hit southern Israel, killing a 50-year-old man and wounding two other civilians, police said.
Islamic Jihad and two more secular factions, the Popular Front for the Liberation of Palestine (PFLP) and Al-Aqsa Martyrs Brigades, separately took credit.
Two other Israeli air strikes followed, killing four Islamic Jihad gunmen and wounding a fifth. The military said the gunmen had carried out cross-border shellings.
Israel demanded international intervention to stop the Palestinian attacks.
"We seek no confrontation with the Palestinians and do not want to inflame the situation, but we will not absorb shelling after shelling without a response," Foreign Minister Avigdor Lieberman said, threatening unspecified "consequences."
An Egyptian official later said all sides had agreed, at Cairo's behest, to cease fire early on Sunday.
"Egypt will pursue its contacts with all the sides until the agreement goes into effect," the official said. Neither Israel nor Palestinian factions had any immediate comment.
The United Nations, which runs an extensive aid network in Gaza and is among foreign powers trying to revive moribund peace talks between Israel and the US-backed Palestinian administration in the occupied West Bank, had also urged calm.
Hamas last week repatriated an Israeli soldier it seized in 2006 in exchange for the release of more than 1,000 jailed Palestinians. That deal, brokered by Egypt's military rulers, stirred speculation a more enduring detente was in the works.
Commenting on the Rafah deaths, Hamas spokesman Sami Abu Zuhri accused Israel of a "serious escalation against our people".
In keeping with Israeli government policy, the military statement said Hamas bore ultimate responsibility "for any terrorist activity emanating from the Gaza Strip".
Islamic Jihad released images of what it said was the firing by its men of a truck-mounted multiple rocket-launcher, a platform not previously seen in Gaza. Israel says Gazan arsenals have been boosted by gun-running from Libya since the fall of its ruler, Muammar Gaddafi.