Israeli raids in the West Bank and Gaza Strip killed 17 Palestinians, among them three children, as Gaza-based militants fired at least 30 rockets and mortars at southern Israel.
The Israeli attacks bring to 30 the number of Palestinians killed, including the 17 killed on Thursday, in escalating violence since Wednesday as Israeli Defence Minister Ehud Barak threatened an invasion of the Hamas-controlled Gaza Strip if the rocket fire did not end.
The three children were killed as they approached a rocket launcher in the northern Gaza town of Beit Lahiya. Five Palestinians were killed and three wounded later on Thursday evening in three separate Israeli air strikes in the Gaza strip.
Witnesses said an Israeli aircraft attacked a Hamas police station in the Beach Refugee camp, killing two and injuring three not far from senior Hamas leader and deposed prime minister Ismail Haniya, west of Gaza City.
Two more Palestinian civilians were killed in western Gaza City, when an Israeli missile missed a car full of militants and hit a truck delivering soft drinks, according to witnesses. The fifth casualty was a Palestinian shepherd killed close to a rocket launcher east of the northern Gaza Strip town of Beit Lahia.
The air strikes came as rockets slammed into the Israeli coastal city of Ashqelon, around 15 km north of the Strip and until recently largely out of range of the projectiles fired from the salient.
Barak said Israel was "not afraid" to take the step of invading Gaza if the rocket fire did not come to an end, according to Israeli media reports.
Earlier Thursday, Israel had launched three air strikes in Gaza and an arrest raid in the West Bank, killing eight Palestinian militants, including the son of a high-ranking official in the radical Islamic Hamas movement ruling Gaza.
The latest attacks follow nine air strikes in Gaza Wednesday, including on a van with Hamas fighters, the Interior Ministry of the de-facto Hamas administration and on rocket launchers. Militants have responded by launching more than 100 rockets at southern Israel since Wednesday, killing one person.
Hamas' rockets Thursday knocked out power in Ashqelon and a factory dining room was struck minutes after some 120 workers had left the room. A house in the town of Sderot suffered a direct hit, and rockets landed near a college in Sderot and a hospital in Ashqelon where many casualties of the rockets are often treated.
Hamas leader Haniya, who continues to call himself prime minister in Gaza despite his dismissal by President Mahmoud Abbas after Hamas' violent Gaza take-over in June, condemned the Israeli air campaign and said it was a sign of "hysteria" among the Israeli leadership.
"The Israeli aggressions and bombing the governmental buildings and the civilian institutions will not weaken the will and endurance of the Palestinian people," he said in a written statement sent to reporters from his hideout.
Haniya has gone underground following warnings by Israel that it will expand its targeted killings to Hamas' political leadership if the rocket attacks continue.
Israeli Foreign Minister Tzipi Livni called on the international community to respect the actions Israel was taking to defend its citizens.
"We do not accept the arguments and condemnations that there are casualties on both sides, since there is no moral equivalence between terrorists and those who fight them, even if in these actions innocent civilians are hurt," she said at the start of a meeting with the Lithuanian foreign minister.
Senior Abbas aide Saeb Erekat called on Israel to stop its "crimes" and accept a truce in Gaza to save the peace process, which was revived in November after a seven-year freeze, but has since been overshadowed by the violence in Gaza.
Israel, however, has so far rejected a ceasefire, saying that it will not engage in talks with Hamas, which does not accept its right to exist. It has said the radical movement was "welcome" to stop the rocket attacks from Gaza anytime, at which point it too would stop its retaliatory air strikes and ground incursions into the Strip.
Erekat said US Secretary of State Condoleezza Rice, due to leave for the Middle East Monday, was scheduled to meet Abbas Tuesday in a bid to push forward the peace process.
In Nablus on the northern West Bank, an Israeli army unit entered the city's Balate refugee camp on a "search and arrest raid", sparking a clash with gunmen of the al-Aqsa Martyrs Brigades, the armed wing of Abbas' Fatah party, killing two and wounding a third.