Israel said its warplanes had targeted and killed several of the Islamist group Hamas's intelligence leaders early on Wednesday. Other strikes hit what the military said were rocket launch sites, Hamas offices and the homes of Hamas leaders.
The heaviest offensive between Israel and Hamas since a 2014 war in the Hamas-ruled enclave has increased international concern that the situation could spiral out of control.
"Israel has gone crazy," said a man on a Gaza street, where people ran out of their homes as explosions rang out.
Many Israelis also spent a sleepless night, with sirens sounding at 3 a.m. in Tel Aviv, heralding several waves of rocket strikes in Israel's heartland.
"The children have escaped the coronavirus, and now a new trauma," an Israeli woman in the coastal city of Ashkelon said in footage shown by Channel 11 television.
U.N. Middle East peace envoy Tor Wennesland said the United Nations was working with all sides to restore calm. Egypt made calls overnight to Palestinian leaders to urge restraint, Egyptian security sources said.
Gazans' homes shook and the sky lit up from Israeli attacks, outgoing rockets and Israeli missiles.
Israelis ran to shelters or lay flat on pavements in communities more than 70 km (45 miles) up the coast from Gaza and into southern Israel as explosions were heard and interceptor missiles streaked into the sky.
An Israeli was killed on Wednesday by an anti-tank missile fired from Gaza at a vehicle near the border, Israel's national ambulance service said. Two people were killed by a rocket that hit their car in Lod, near Tel Aviv.
Lod and other mixed Arab-Jewish towns have been gripped by demonstrations over the Gaza violence and tensions in Jerusalem.
In Gaza, 11 people were killed in Israeli strikes on Wednesday, the health ministry said.
Hamas's armed wing said it fired 210 rockets towards Beersheba and Tel Aviv overnight in response to the strikes on the tower buildings in Gaza City. Israel's military says about a third of the rockets have fallen short, landing within Gaza.
For Israel, the targeting of Tel Aviv, its commercial capital, posed a new challenge in the confrontation with Hamas, regarded as a terrorist organisation by Israel and the United States.
The violence followed weeks of tension in Jerusalem during the Muslim fasting month of Ramadan, with clashes between Israeli police and Palestinian protesters in and around Al-Aqsa Mosque.
These escalated ahead of a court hearing - now postponed - that could lead to the eviction of Palestinian families from East Jerusalem homes claimed by Jewish settlers.
Violence has also flared in the occupied West Bank. Medical sources said a 16-year-old Palestinian was killed in clashes with Israeli forces on Wednesday.
"VERY HEAVY PRICE"
Israeli Prime Minister Benjamin Netanyahu said militants would pay a "very heavy" price for the rocket attacks.
Hamas leader Ismail Haniyeh said Qatar, Egypt and the United Nations had been in contact, urging calm, but his group's message to Israel was: "If they want to escalate, the resistance is ready, if they want to stop, the resistance is ready."
The White House said on Tuesday Israel had a legitimate right to defend itself from rocket attacks but applied pressure on Israel over the treatment of Palestinians, saying Jerusalem must be a place of coexistence.
Although the latest problems in Jerusalem were the immediate trigger for the hostilities, Palestinians have become more frustrated by setbacks to their aspirations for an independent state in the past few years.
These include Washington's recognition of disputed Jerusalem as Israel's capital, a U.S. plan to end the conflict that they saw as favourable to Israel, and settlement building.
Israel said it had dispatched infantry and armour to reinforce tanks already gathered on the border, evoking memories of the last Israeli ground incursion into Gaza to stop rocket attacks in 2014.
Witnesses said Israeli aircraft destroyed Gaza's Hamas-run police headquarters in the city.
Gaza's health ministry said that of the people reported dead in the enclave, 13 were children. The Israeli military said it was looking into these reports and that preventing civilian casualties was a priority.
(Reporting by Nidal al-Mughrabi, Dan Williams, Ari Rabinovitch and Rami Ayyub; Additional reporting by Stephanie Nebehay in Geneva, Nandita Bose and Steve Holland in Washington and Michelle Nichols in New York, and Stephen Farrell in Jerusalem; Writing by Kevin Liffey; Editing by Angus MacSwan and Timothy Heritage) ((email@example.com; +972-2-632-2202))