The Israeli air force bombed 160 targets in the Gaza Strip overnight on Tuesday as it pressed a widescale campaign to stop volleys of Palestinian rocket fire.
In the densely populated area explosions echoed day and night, shaking buildings and sending up plumes of smoke.
The Israel-Gaza border heated up in June after Israel's arrest of hundreds of Hamas
activists in the occupied West Bank, where three Israeli youths went missing and were later found dead. In a suspected revenge attack, a Palestinian teenager was abducted in East Jerusalem last week and burned alive.
Israeli General Moti Almoz told military radio on Wednesday that over the past two days about 430 targets had been attacked, as Operation Protective Edge entered its second day, AFP reports.
The targets included about 120 concealed rocket launchers, 10 Hamas command and control centres, among them two homes, and many tunnels, he said.
"Hamas's weapons stockpile has suffered significant damage over the past two days," General Almoz said and the Islamist movement had been "forced into a corner" and was trying to launch attacks on multiple fronts.
"Last night, Hamas started to unveil its surprises," he said referring to an attempted attack by sea and the barrage of long-range rockets fired at cities as far away as Jerusalem, Tel Aviv and the northern coastal city of Hadera, more than 100km from Gaza.
"Hamas was trying to surprise and find the weak points and penetrate Israel by sea or through tunnels; these incidents were thwarted very successfully by the IDF," he said.
The rocket fire continued early on Wednesday, with army radio reporting that at least five projectiles from Gaza were shot down over Tel Aviv and its surrounds by Israel's Iron Dome anti-missile system.
The military wing of Hamas has warned that all Israelis are now targets. The Ezzedine Al-Qassam Brigades claimed the rocket fire, saying it had launched four M75 rockets at Israel's commercial capital.
Interior Minister Gidon Saar, a member of Israel's security cabinet, said the military had been given orders to "significantly" expand the campaign. Israel would not stop until it had dealt a decisive blow to the militant groups operating out of Gaza, he said.
Air raid sirens have been sounding in Jerusalem, with three explosions heard west of the city, apparently from intercepts by Israel's Iron Dome anti-missile system.
"No other country lives under such a threat, and no country would accept such a threat," Prime Minister Benjamin Netanyahu said in a statement on Tuesday, the BBC reports.
Israel has warned it may send ground troops into Gaza to stop the rocket attacks. It has authorised the call-up of up to 40,000 military reservists. Hundreds of reservists have already been drafted to bolster forces around Gaza.
The health ministry in Gaza said 25 Palestinians have been killed and 70 hurt in recent hostilities.
Seven killed on roof
A Palestinian journalist says seven people were killed in a strike on the home of a Hamas leader. They included people forming a "human shield" on the roof of the home in the southern city of Khan Younis.
Two teenage boys were among those killed, and another 25 people were injured. Journalist Fares Akram told Radio New Zealand they were trying to protect the home from bombing.
"In Khan Younis, south of Gaza Strip, they wanted the residents of a house to evacuate, but some people formed a human chain and they stood on the roof of the house that was threatened with bombing. And the F16 aeroplanes hit the house and killed seven people."
Palestinian divers shot
Five Palestinian troops have been shot dead after attempting to attack Israel from the sea, CNN reports. They landed on a beach at Zikim, where an army base and a kibbutz and are located, just across the border from Gaza and south of the Israeli city of Ashkelon.
The group tried to enter Zikim through the water, Israeli media reported. Israeli soldiers spotted the divers and called in an infantry force.
Israel then responded by infantry, air force, and navy, and the five attackers were killed, the Israel Defense Forces said. One of its soldiers was wounded.
Hamas has claimed responsibility for "storming" into Israeli territory.
MFAT advises against travel
The New Zealand Government is expressing concern at the escalation of violence in Gaza and Israel and has called for an immediate end to rocket attacks.
Foreign Affairs Minister Murray McCully says New Zealand urges both sides to show restraint and to prevent any further civilian casualties.
The Ministry of Foreign Affairs and Trade continues to advise against all travel to Gaza, and New Zealanders currently there are advised to depart as soon as it is safe to.