Israeli planes have carried out 13 air strikes on the Hamas-ruled Gaza Strip, Palestinian sources have told the BBC.
Four of the strikes took place near the town of Khan Younis, where two Israeli soldiers were killed in clashes with Palestinian fighters last week.
Israel says the operation was targeting four weapons factories. Several minor civilian casualties were reported.
The latest violence is the most serious since the end of Israel's assault on Gaza in January 2009.
Palestinians and rights groups say more than 1,400 Gazans died in the conflict, while Israel puts the figure at 1,166. Thirteen Israelis, including three civilians, were killed.
Witnesses and Hamas officials said the latest Israeli raids targeted metal workshops, farms, a milk factory and small sites belonging to the military wing of Hamas.
The director of ambulance and emergency, Muawiya Hassanein, said that three children including an infant were slightly injured by flying debris.
Israel says there have been at least 20 rocket or mortar attacks in the past month that have landed on its territory, one of which killed a farm worker.
The BBC's Jon Donnison, in Jerusalem, says Israel appears to be sending a signal that whenever there is militant activity inside Gaza it will respond.
By Jon Donnison
BBC News, Jerusalem
For many Gazans these strikes were expected after two Israeli soldiers were killed by Palestinian militants in Gaza last week.
At least four of the airstrikes were in the southern town of Khan Yunis close to where the Israeli soldiers died. As is often the case, the legitimacy of the targets is being disputed.
These strikes were on a relatively small scale but are the heaviest since last year's major Israeli offensive in Gaza.
Since then the situation has been moderately calm but Gaza remains under an Israeli economic blockade and there is sporadic rocket fire from militants in Gaza.
Many ordinary people on both sides feel it is only a matter of time before there is another war.
In a statement released to the BBC, the Israeli military said Israel would "not tolerate terroristic activity inside Gaza that threatens Israeli citizens".
Deputy Prime Minister Silvan Shalom told public radio: "If this rocket fire against Israel does not stop, it seems we will have to raise the level of our activity and step up our actions against Hamas."
Correspondents say this kind of rhetoric has been heard in the past and should not be taken as a cue for imminent military action.
But tension is growing between Israel and Hamas, and some analysts view wider operations against Hamas as inevitable.
Palestinian news agencies reported that Israeli aircraft dropped leaflets over parts of Gaza on Thursday warning residents of retaliation for last Friday's killings of the soldiers in Khan Younis.
They were the first Israeli soldiers to be killed in hostile fire in Gaza in over a year. The military wing of Hamas claimed responsibility for those attacks.
Hamas said police stations and training facilities were among the targets of Israel's overnight raids.
Khimar Abu Sada, professor of political science at al-Azhar university in Gaza City, told the BBC he had heard a number of explosions in the city.
"[On Thursday] the Israeli army distributed a number of leaflets in Gaza City warning the Palestinians to expect some kind of Israeli retaliation for the killing of two Israeli soldiers... so we were expecting something on Friday but not Thursday night," he said.
Tensions in the region are running high after a recent Israeli government announcement of plans to build 1,600 new homes for Jewish people in East Jerusalem, which the Palestinians want as a capital of a future state.
The US has criticised the Ramat Shlomo project, which prompted the Palestinians to pull out of US-brokered indirect peace talks.
The row has caused one of the worst crises in US-Israeli ties for decades, and the US is reportedly considering abstaining from a possible UN Security Council resolution against Israeli settlement expansion. The US usually blocks Security Council resolutions criticising Israel.
Militants in the Gaza Strip have recently stepped up rocket fire directed at Israel.
On Wednesday, they fired a rocket into an empty field in southern Israel, but there were no reports of casualties or damage, military sources said.
One of the targets was a factory in Gaza City
In December 2008, the Israeli armed forces launched a 22-day offensive in the Gaza Strip, bombing Palestinian cities before sending in ground troops - in response, Israel said, to Hamas rocket attacks on southern Israel.
After this, Hamas launched its rockets in increased numbers at Israeli towns near the Gaza Strip, before agreeing to a ceasefire.
Our correspondent says that Hamas has tried to rein in rocket fire from Gaza, and that there has been a reduction in attacks in the last year.
Israel would say that is a result of its military operations, our correspondent says.
But there are many militant groups in Gaza and Hamas does not control all of them, our correspondent adds.
If I had one wish and one only, it would be that the Palestinians stop lobbing rockets over the border, and the Israelis stop firing back. I feel so sorry for the wee ones on both sides, who are traumatised from birth and are brought up believing that this is somehow a "normal" way to live.
TFG, I totally agree. Both sides should stop. I get rather annoyed when people just blame the Israelis when mostly they are responding in a very heavy-handed way to rockets being fired on a daily basis from Gaza. It should be borne in mind that those rockets are being fired from within civilian areas, but the United Nations could step in so that Israel doesn't continue its really punitive retaliation. That's the way I see it. The Israelis are not the big, bad aggressors that many would have us believe.
Permissions in this forum:You cannot reply to topics in this forum