An Israeli strike killed a Palestinian in Gaza hours after Prime Minister Benjamin Netanyahu warned Sunday that operations could be expanded in the enclave in response to surging rocket fire.
An army spokesman said the raid targeted "terrorists" who had been preparing to fire rockets at the Jewish state.
Earlier two rockets fired from Gaza and targeting the southern Israeli city of Netivot were intercepted by the Iron Dome anti-missile system and destroyed in flight, the army said.
Palestinian security sources said a drone strike targeted a group of armed men, killing one militant.
The attack came after the air force struck 12 targets overnight in Gaza following repeated rocket fire on southern Israel, including a volley that hit a paint factory in Sderot.
The rocket fire has coincided with a huge Israeli arrest operation in the West Bank to track down three teenagers who went missing on June 12, whom Israel says were kidnapped by Hamas militants.
Speaking to ministers at the weekly cabinet meeting, Netanyahu said almost nightly military strikes on Gaza could be expanded should the need arise.
"Over the weekend, the IDF attacked multiple targets in response to firing at Israel from the Gaza Strip. We are ready to expand this operation as per need," he said, without elaborating.
Hawkish Foreign Minister Avigdor Lieberman warned a limited response would only strengthen the Islamist movement Hamas, which held power in Gaza for the past seven years but stepped down this month after forming a unity government with the West Bank.
"We have seen that, at the end of the day, limited operations only strengthen Hamas so the alternative is clear," he said, repeating his long-held assertion that Israel should re-occupy Gaza, which it left in 2005.
Signup to our newsletter and follow us on Facebook and Twitter!
- Tension escalates -
Israeli warplanes struck 12 targets overnight, which the army said were being used for "terrorist activity". Palestinian officials said two people had been lightly injured.
The overnight raids came after six rockets struck southern Israel on Saturday evening, one of which hit a paint factory in Sderot industrial zone, triggering an explosion and major fire, police said.
On Friday, two Palestinians were killed in an Israeli air strike on a car near Gaza City, with the military saying they had been involved in firing rockets at Israel.
Hours earlier, a bomb had exploded along the southern sector of the border, prompting Israeli tanks to open fire towards the southern city of Khan Yunis, injuring five Palestinians, one of them a child.
The military said it had fired on "lookout posts used to guide the attack" with Palestinians officials saying it had targeted "two mosque minarets east of Khan Yunis."
Over the past fortnight, 25 rockets fired from Gaza have struck southern Israel, prompting a series of almost nightly Israeli air strikes.
The rocket fire has coincided with the arrest of more than 400 Palestinians, most of them Hamas members, since Israel launched a manhunt for the missing teens.
Five Palestinians have also been killed in the search operation.
There has been no claim for the youths' abduction, nor has there been any indication of their whereabouts.
On Sunday night tens of thousands of Israelis rallied in solidarity with the missing boys in Tel Aviv, police said.
The throngs sang and prayed while the mothers of the three youths appealed for their release.