Israel has killed the commander of Hamas' military wing, as it launched a series of airstrikes on targets across Gaza.
Palestinian officials say the attacks have killed a total of 10 people so far - including two girls under the age of five - and injured 20.
Two of Hamas' training facilities were among the sites hit by the bombings in Gaza City, Khan Younis and Rafah.
Israel says the airstrikes are the beginning of a broader operation - codenamed 'Pillar of Defence' - launched in response to days of heavy rocket fire from Gaza.
Sky sources say targets in northern Gaza are under ongoing bombardment from the Israeli navy.
Israeli authorities said earlier that aircraft had targeted 20 facilities that served as storage or launching sites for rockets - and that the killing of Hamas military commander Ahmed al Jaabari was "the beginning".
The official Twitter page of the Israeli military said a ground invasion was possible.
"All options are on the table. If necessary, the (Israeli military) is ready to initiate a ground operation in Gaza," it said.
Israel military spokeswoman Avital Liebovich said: "After the rocket fire of recent days, the chief of staff has decided to authorise the targetting of terrorist organisations in the Gaza Strip - Hamas, Islamic Jihad and others. This is the beginning."
Another spokesman, Brigadier General Yoav Mordechai told Channel 2 TV that the ensuing conflict could "prove protracted", adding that "the homefront must brace itself resiliently".
The Israeli Defence Force - which released black and white aerial footage of the airstrike on the car carrying Mr Jaabari - says the number of cross-border rocket launches from Gaza has risen from 310 in 2009 to 1,200 in 2012.
The attacks mark the biggest escalation between Israel and Gaza militants since a 2008-2009 conflict - and came despite signs on Tuesday that neighbouring Egypt had managed to broker a truce in the enclave after a five-day surge of violence.
Immediate calls for revenge were broadcast over Hamas radio.
"The occupation has opened the gates of hell," Hamas' armed wing said.
A statement issued by the group said: "The Palestinian government mourns the loss of the senior Palestinian leader Ahmed al Jaabari, one of the symbols of the resistance and holds the occupation responsible for the consequences of this crime."
Egypt's foreign ministry condemned the attacks and its president, Mohammed Morsi, has withdrawn the country's ambassador from Tel Aviv. Israel has reportedly removed its ambassador from Cairo in response.
A statement issued by US state department deputy spokesman Mark Toner said: "We strongly condemn the barrage of rocket fire from Gaza into southern Israel, and we regret the death and injury of innocent Israeli and Palestinian civilians caused by the ensuing violence.
"We support Israel’s right to defend itself."
Meanwhile, United Nations secretary general Ban Ki-moon called on both sides for an "immediate de-escalation of tensions".
Palestinian President Mahmoud Abbas called for an urgent Arab League meeting, which will reportedly take place on Saturday.
Sky's Foreign Affairs Editor Tim Marshall said the anticipated rocket attacks on Israel from Gaza could have major consequences.
"Every missile fired carries the risk of triggering the ground attack because if there is a single Israeli civilian fatality caused by rocket fire, the IDF will probably go in," he said.
Hamas said Mr Jaabari, who ran the organisation's armed wing, the Izz el Deen al Qassam, died along with a passenger after their car was hit by an Israeli missile in Gaza City.
Mr Jaabari oversaw the capture and subsequent release of Israeli soldier Gilad Shalit in October 2011, in exchange for 1,027 prisoners in Israeli jails.
Israel's Shin Bet domestic intelligence service confirmed it had carried out the attack, saying it had killed Mr Jaabari because of his "decade-long terrorist activity". He has long topped Israel's most-wanted list.
It marks a dramatic resumption of Israel's policy of assassinating Palestinian militant leaders.
A tweet posted by the British Foreign Office said: "We continue to call on all sides to exercise restraint to prevent a dangerous escalation that would be in no one's interests."
Mr Jaabari becomes the most senior Hamas official to be killed since an Israeli invasion of Gaza four years ago.
Crowds of people and security personnel rushed to the scene of the strike, trying to put out the fire that had engulfed the car and left it a charred shell.
Hamas police cordoned off the area around a hospital where at least one body from the strike was taken.
Israeli officials had said in recent days that they were considering assassinating top Hamas officials following a wave of heavy rocket fire from the Hamas-ruled Gaza Strip, triggering Israeli airstrikes.