Israeli military aircraft bombed Hamas targets in the Gaza Strip early on Friday, hours after two rockets were launched at Tel Aviv in the first such attack since a 2014 war.
Following the overnight exchanges, sirens sounded again in Israeli border towns after dawn broke.
Palestinian news media reported strikes throughout Gaza, from Rafah in the south to the north of the densely populated coastal strip that is home to two million Palestinians.
Some of the buildings targeted had been evacuated as a precaution, as Hamas had expected an Israeli response.
Health ministry officials in Gaza said two people, a man and a woman, were wounded when their house was damaged in Rafah in the early morning.
Witnesses said powerful explosions from the air strikes rocked buildings in Gaza and lit the skies over targeted sites.
If not Hamas, who?
On Thursday night, the sirens howled farther north, in Tel Aviv, Israel's commercial capital, set off by what the military said were two incoming, longer-range rockets from Gaza.
That salvo caused no casualties or damage, missing built-up areas. But it rattled Israeli nerves ahead of an April 9 election in which Prime Minister Benjamin Netanyahu is seeking a fifth term on the strength of his national security credentials.
Explosions were heard in Tel Aviv and witnesses said interceptor missiles had detonated - although the military said no rockets were shot down.
It was the first such attack on the city since the 2014 Gaza war between Hamas and Israel. There have been several smaller rounds of fighting since, reined in by Egyptian and U.N. mediation.
"This was basically a surprise," military spokesman Brigadier-General Ronen Manelis told Israel Radio on Thursday.
Manelis said Israel did not yet know who had carried out the rocket launches. But another Israeli military spokesman laid the blame on Hamas on Friday.
"Hamas carried out the rocket fire against Tel Aviv yesterday evening," Lieutenant-Colonel Avichay Adraee said.
Hamas denied involvement, saying the launches took place as its leaders met Egyptian delegates about efforts to secure a long-term ceasefire with Israel.
Israeli analysts speculated that Palestinian militants opposed to any deal between Hamas and Israel were behind the rocket attacks.
Islamic Jihad and the Popular Resistance Committees, two smaller Gaza armed factions, also denied responsibility.
On Friday, Islamic Jihad's armed wing said in a statement that it had put its fighters on full alert to respond to Israeli attacks.
Washington chimes in
The latest flare-up drew a U.S. statement of support for Israel.
"Hamas and other terror orgs in Gaza continue to fail their people day after day & drag Gaza further & further down by constantly choosing violence," Jason Greenblatt, the White House's Middle East envoy, said on Twitter. "This method will never work. Ever!"
Naftali Bennett, a right-wing member of Netanyahu's security Cabinet whose party is competing against the veteran prime minister's for votes in the coming election, demanded that Israel resume its assassination of Hamas chiefs.
"The time has come to defeat Hamas once and for all," he said on Thursday night.
Netanyahu also faced pressure from the centre-left opposition, whose leading candidate, former General Benny Gantz, said: "Only aggressive, harsh action will restore the deterrence that has eroded" under the prime minister's watch.
Tensions have been high for the past year along the Israel-Gaza frontier, as violent protests by Palestinians near Israel's border fence have often provoked the Israeli military into a lethal response.
Some 200 Palestinians have been killed during the demonstrations begun a year ago, on March 30, and about 60 more have died in other incidents, including exchanges of fire across the border. Two Israeli soldiers have been killed by Palestinian fire.