Israeli jets bombed several Hamas camps in the Gaza Strip early Thursday after Palestinians fired a rocket in a southern Israeli city, the Israeli military said.
There were no immediate reports of casualties in the air force strikes or from the rocket that landed in Beersheva settlement, the first time the city has been targeted since Israel's devastating 2008 Gaza offensive.
Israeli television broadcast footage of a crater gouged out of a street next to a badly damaged house that was hit by a military grade Grad rocket.
Residents said they escaped harm after warning sirens sent them running for the bomb shelters before the missile struck. Emergency services raised the alert level in southern Israel and braced for further attacks.
The tit-for-tat fire comes after a day of clashes along the Gaza border in which one Jihad militant was killed and 10 other people wounded.
The military said in a statement it had "targeted a terrorist squad in the northern Gaza Strip, in the same location where rockets were fired towards the Israeli city of Beersheva."
Later, war planes bombed several other sites across the coastal strip. Palestinian sources said there were four Israeli strikes, three in Gaza City and one in the southern town of Khan Yunis. All targeted Hamas training centres.
Although Wednesday's clashes were with the smaller Islamic Jihad, Israel said it held Gaza's Hamas rulers responsible for the violence.
The army said it held Hamas "solely responsible for maintaining the calm in the Gaza Strip and for any terrorist activity emanating from it."
Israeli Deputy Prime Minister Silvan Shalom said he saw Iran's hand in the surge of violence, trying to take advantage of the turmoil sweeping the region.
"The rocket attack was a very grave act carried out by the agents of Iran, Hamas," he told public radio.
Israel carried out a massive 22-day offensive against the territory from December 2008 to January 2009, which killed 1,400 Palestinians, more than half of them civilians, and 13 Israelis, 10 of them soldiers.
On Wednesday, one Palestinian was killed and ten other people wounded when an Israeli tank opened fire in clashes east of Gaza City, Palestinian officials said.
Two other militants were among the wounded, Islamic Jihad said in statement, adding that the tank opened fire after the gunmen fired two mortar shells towards Israeli tanks which were operating inside the (Gaza) border".