Defence Minister Ehud Barak warned Tuesday that a flare-up in violence with Gaza was "not over," after Palestinian militants fired two more rockets and Israel carried out air strikes overnight.
The violence that began on Saturday appeared to have slowed considerably, hours after militants said they would commit to a ceasefire if the Jewish state did the same.
Israeli warplanes carried out air strikes against several targets overnight, causing no injuries, although medics in Gaza said Tuesday a seventh person had died in the violence, succumbing to wounds he sustained on Saturday.
Palestinian eyewitnesses on Tuesday afternoon reported new shelling in Jabaliya, in northern Gaza, where AFP reporters saw damage to a house.
They also reported an Israeli air strike elsewhere in northern Gaza, although the military said it had no information on either incident.
Barak, meeting Israeli military chiefs, warned that the current round of confrontations was ongoing, adding that Israel would decide how and when to respond to the rocket fire.
"It is certainly not over and we will decide how and when to act if necessary," he said in remarks communicated by his office.
"We intend to reinforce the deterrence -- and strengthen it -- so that we are able to operate along the length of the border fence in a way that will ensure the security of all our soldiers who are serving around the Gaza Strip," he said.
"At this time... it is preferable to act (in a timely fashion) rather than just talk."
Prime Minister Benjamin Netanyahu told community leaders in southern Israel that he would decide when to retaliate.
"Anyone who thinks that he can harm the daily lives of southern residents and not pay a heavy price for it is mistaken," a statement from his office quoted him as saying during a meeting in the city of Beersheba.
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"I am responsible for choosing the right time for exacting the most heavy price and that's how it will be."
On Monday night, Israeli planes struck three sites in Gaza, which the military identified as a weapons facility and two rocket launch sites.
And the following morning, the army said militants fired two rockets into Israel, causing no injuries, with local media reporting one of them was a longer-range Grad rocket, which landed near the coastal town of Ashdod.
In Gaza, medics said 20-year-old Mohammed Ziad, a member of Hamas's armed wing, the Ezzedine al-Qassam Brigades, died Tuesday of wounds he sustained on Saturday, after the flare-up began when militants fired at an Israeli army jeep.
That attack injured four soldiers and prompted a quick escalation in violence, with Israel carrying out air strikes and shelling that killed six other Palestinians and injured more than 30.
Gaza militants fired 123 rockets into southern Israel, lightly injuring four people. The military said 19 rockets were fired on Monday, four of which were intercepted by its Iron Dome system.
Despite Barak's comments, and a series of bellicose statements from Israeli politicians on Monday, other officials sounded a more cautious tone on Tuesday.
"I don't think it will be necessary to enter the Gaza Strip," former military intelligence chief Amos Yadlin told Israel's army radio.
"The army has at its disposal a series of measures that it has not yet used, it can raise the level of its response without resorting to a ground operation."
Egyptian-led efforts are still under way to secure a ceasefire, with Gaza's main militant groups, led by Hamas and Islamic Jihad, on Monday saying they were ready for a ceasefire if Israel "stops its aggression" against the territory.
"The response of the resistance depends on whether the Zionist aggression against our people is continued," they said at a Gaza City news conference.