Palestinian witnesses say Israeli aircraft are striking Hamas militant targets in the southern Gaza Strip.
The late-night local time strikes follow a rocket launched from Gaza that set off air-raid sirens in southern Israel and sent residents rushing to bomb shelters before the rocket fell in open ground.
There was no immediate comment from the Israeli military.
The rocket strike and airstrikes ended a brief lull that had prevailed for most of the day after an earlier exchange of heavy fire.
The cross-border fighting yesterday was triggered by a rocket fired from Gaza that slammed into a house in central Israel and wounded seven people.
Israel's UN ambassador warned Gaza's Hamas rulers that if attacks against Israel continue Hamas leaders will face the "might" of the Israeli military and "be buried in the tunnels of Gaza".
Danny Danon told the UN Security Council that Hamas had committed a "heinous crime against Israel, a deliberate and direct act of terror against our people" when it fired the rocket yesterday.
The Palestinian ambassador to the UN says the situation in Gaza "is part of the long-running campaign of violence and terror being waged against our people by Israel."
Riyad Mansour warned the Security Council that "today, again, we find ourselves at the edge of the precipice, fearing for the lives of our people as Israeli officials ratchet up their threats of war against the besieged Gaza Strip."
Mansour represents the West Bank-based Palestinian Authority.
Israel has bolstered its troops on the southern frontier in preparation for further escalation.
-AP