Israeli aircraft on Sunday killed three Palestinians, including a 12-year-old boy, medical sources in Gaza said, as militants fired rockets into Israel for a third day.
The violence followed a familiar pattern that has seen the two sides engage in numerous attacks along Israel's border with the Hamas-controlled Gaza Strip. The bloodshed has usually ended after several days with an informal truce.
Defence Minister Ehud Barak predicted in a statement that it would take several more days until the violence ended.
We are at the height of this round (of violence), Israeli Prime Minister Benjamin Netanyahu told his cabinet on Sunday. We have exacted a heavy price from them and we will continue to act as needed.
Palestinian medical officials said Sunday's air strikes had killed a civilian guard at a farm and a militant, in addition to the 12-year-old boy.
An Israeli military spokesman said the army was looking into reports of the boy's death. The IDF (Israel Defence Forces) has no intention of targeting anything but terrorist infrastructure, as we have seen in the past few days, he said.
A separate military statement said the attacks had targeted a terrorist squad that was in the final stages of preparing to fire rockets at Israel from the northern Gaza Strip.
Violence flared on Friday when an Israeli air strike killed two Palestinian militant leaders in Gaza. A salvo of rockets was fired into Israel in revenge, leaving six people wounded.
About 30 of those rockets were intercepted and destroyed by Israel's Iron Dome anti-missile system, the Israeli military said. The army has estimated that more than 100 rockets have been fired into southern Israel since Friday.
The attacks have disrupted normal life in southern Israel, forcing many schools to close. Israeli aircraft have continued to fly attacks over the Gaza strip, killing at least 16 people, including militants, since Friday.
Though serious, few in Israel expect the bloodshed to lead to a major Israeli ground assault in the Gaza Strip reminiscent of a three-week war in late 2008 and early 2009 which left some 1,400 Palestinians and 13 Israelis dead.
The United Nations, the European Union, the West Bank-based Palestinian Authority, and neighbouring Egypt have all called for an end to the violence.
Egypt's peace treaty with Israel has been strained by last year's toppling of Hosni Mubarak after the success of Islamist politicians in parliamentary elections earlier this year.
A Palestinian official, speaking on condition of anonymity, said Egypt had begun mediating a ceasefire, but the Egyptian Foreign Ministry had no comment.
Israel said it was willing to end this round of violence if rockets from Gaza stopped, the Palestinian official said on Sunday. Palestinian factions also told Egypt they were not interested in escalation and that they did not start the round, but Israel cannot decide to end it whenever it wants to do so.
Israeli Vice Prime Minister Moshe Yaalon told Army Radio that Israel's message was clear: If you don't shoot, we don't shoot, if you do shoot, you will pay a price.
Islamic Jihad and the Popular Resistance Committees, armed groups largely independent of Hamas, have said they fired most of the rockets launched at Israel since Friday.
(Reporting by Nidal al-Mughrabi; Additional reporting by Edmund Blair in Cairo; Writing by Maayan Lubell; Editing by Jeffrey Heller and Andrew Osborn)