Islamic Jihad militants in Gaza fired scores of rockets at southern Israel on Wednesday, causing no casualties but Prime Minister Benjamin Netanyahu to warn of a tough response.
The escalation came just hours after British Prime Minister David Cameron arrived on his first official visit to the region since taking office in 2010.
It was the heaviest barrage of cross-border rocket fire since a major eight-day November 2012 confrontation between Israel and militants from Gaza's ruling Islamist movement Hamas.
The attacks were claimed by the armed wing of Islamic Jihad, which said it had fired 90 rockets at Israel in response to an air strike on Tuesday that killed three of its militants in southern Gaza.
As tens of thousands of people living in southern Israel rushed to seek shelter from the bombardment an Israeli security source told AFP militants had fired more than 60 rockets and mortar rounds at areas all over the south.
The army put the number at "more than 30 rockets," saying eight of them had struck urban areas, and another three were intercepted by the Iron Dome anti-missile system.
Police raised the level of alert in the south, saying the rockets struck along the length of Israel's border with Gaza.
One hit near a public library in the town of Sderot, and another near a petrol station.
With heavy rain hampering the Israeli air force's ability to conduct air strikes, the military said it had hit "two terror locations" in northern and southern Gaza with artillery fire, but there were no Palestinian reports of injuries.
"We have attacked two sites with artillery, with our tanks on the border with Gaza," Lieutenant Colonel Peter Lerner, the chief military spokesman, told journalists
The attack began shortly after Netanyahu and Cameron addressed the parliament, and prompted a stern warning from the Israeli leader who pledged to act "with great force" against those seeking to harm Israel, a statement from his office said.
"We will continue to strike those who want to harm us; we'll act against them very forcefully," he was quoted as saying in a separate statement communicated by his spokesman Ofir Gendelman.
"This is the biggest attack on Israel since the 2012 Operation Pillar of Defence," the military said on Twitter, referring to the 2012 confrontation that claimed the lives of 177 Palestinians, mostly civilians, and six Israelis.
Foreign Minister Avigdor Lieberman said Israel would have no choice but to reoccupy Gaza, from which it withdrew all troops and settlers in summer 2005.
"Following an attack like this -- a barrage of more than 50 rockets -- there is no alternative to a full reoccupation of the entire Gaza Strip," he told private Channel 2 television.
In Gaza, Islamic Jihad's armed wing the Al-Quds Brigades issued a statement claiming to have fired "70 rockets" at Israel.
It said its bombardment would continue in response to Israel's "aggression" in Tuesday's air strike.
Hamas warned Israel against escalating the confrontation.
"We hold the occupation responsible, we warn of the consequences of any escalation and we reiterate that resistance is the right of the Palestinian people to defend itself," said Ihab al-Ghassin, a spokesman for the Islamist movement Hamas, which governs Gaza.