More than 100 rockets were fired from Gaza towards Israel early on Wednesday afternoon.
The barrage was in reaction to Israeli strikes on Monday, which killed three senior Islamic Jihad commanders and 10 civilians and injured 20.
Air raid sirens sounded in the border towns of Sderot, Ashkelon and Ashdod and further up the coast in Tel Aviv.
Witnesses said they saw the Iron Dome missile defence system intercepting rockets close to the city.
Israeli media said there had been a direct hit on a kindergarten near the Gaza Strip but no injuries were reported. Schools have been closed since Tuesday.
Flights were briefly prevented from landing at Ben Gurion Airport, but operations have now resumed. A British Airways flight was diverted to Larnaca in Cyprus.
A spokesman for the Israeli Defence Forces insisted Palestinian Islamic Jihad was behind the rocket launches, not Hamas, the group which controls the Gaza Strip. However Hamas has publicly supported the rocket attacks.
Israel launched ‘Operation Shield and Arrow’ in the early hours of Monday morning after rockets were fired at it last week.
Military officers said they killed the men responsible for those attacks and said they had been planning assaults on Israel.
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The IDF confirmed the commanders killed were Khalil Bahitini, who ran PIJ operations in northern Gaza, Tarek Azaldin who allegedly coordinated attacks in the West Bank from Gaza, and Jahed Ahman, a senior figure in the group’s military council.
Later on Tuesday, and again on Wednesday, the Israeli air force hit targets in Gaza they said were preparing to launch missiles, killing a further three people.
Residents near the Gaza border in southern Israel have been ordered to remain close to bomb shelters and hundreds of people evacuated to towns in the north. Outdoor gatherings have been banned and the Erez crossing point between Gaza and Israel closed.
Reservists have been put on standby and Israel’s Home Command said it remained ready for further action.