Israel and Gaza militants traded heavy fire Friday as hopes faded of securing a truce to end days of fighting that have killed dozens, all but one of them Palestinian.
The violence has been met with international calls for de-escalation, with the European Union pushing Thursday for an "immediate comprehensive ceasefire".
Israel announced it was "striking Islamic Jihad targets" in the densely populated Palestinian territory, while AFP journalists saw air strikes hit Gaza City.
Sirens warning of incoming fire meanwhile rang out in Israeli communities close to the border with the Gaza Strip, as well as blaring in an Israeli settlement near Jerusalem in the occupied West Bank.
Violence broke out Tuesday when Israel killed three top members of the Islamic Jihad militant group, while subsequent strikes have killed two other senior figures.
Islamic Jihad said the latest rocket fire, seen by AFP journalists, was a "response to the assassinations and the continued aggression against the Palestinian people".
It came hours after a rocket killed one civilian in the central Israeli city of Rehovot on Thursday evening.
At least 31 Palestinians have been killed, according to Gaza's health ministry, including militants and several civilians as well as children.
Daily life in the coastal territory, ruled by the Hamas militant group, has largely come to a standstill, while Israel has told its citizens near Gaza to stay close to bomb shelters.
In Gaza's central Deir al-Balah area, farmer Belal Basher stood beside the ruins of the home he said was hit by multiple Israeli strikes.
"Our situation is the same as that of any Palestinian citizen whose house is targeted and whose dream, built over the years, is destroyed," the 33-year-old told AFP.
Earlier Friday there had been cautious optimism a truce may be nearing, with an Islamic Jihad source telling AFP a deal drawn up by Cairo had been circulated among the group's leadership.
"Israel must commit to stopping the assassinations in Gaza and the West Bank," a second source within Islamic Jihad said, detailing the group's key condition for a ceasefire.
The decision to renew air strikes on Gaza this week was authorised by Israeli Prime Minister Benjamin Netanyahu, who returned to power in December alongside extreme-right and ultra-Orthodox Jewish allies.
The violence has left more than 90 people wounded in Gaza, according to the latest health ministry toll.
Israel's Magen David Adom emergency services has treated five people hit by shrapnel, glass or suffered blast injuries from the rocket fire.
In Rehovot, 82-year-old resident Ran Lev said he was heading to the bomb shelter when the rocket hit which killed his neighbour.
"The entire apartment was seriously shaking. All the photo frames fell," he said.
The United States, which along with Brussels has blacklisted Islamic Jihad and Hamas, urged that steps be "taken to ensure that violence is reduced".
The Israeli military said it has hit 170 Islamic Jihad targets this week, while more than 860 rockets have been fired from Gaza.
Israel said a quarter of the rockets fell inside Gaza and killed four, including three children, an accusation Islamic Jihad and Hamas did not respond to when approached by AFP.
This week's escalation is the worst since August, when 49 Gazans were killed in three days of fighting between Islamic Jihad and Israel.
At least 19 of those fatalities were children, according to the United Nations, while rocket fire wounded three people in Israel.
That conflict followed multiple wars fought between Israel and Hamas since the group took control of Gaza in 2007.
An Israeli blockade imposed since then has made it impossible for the vast majority of 2.3 million residents to leave Gaza, where poverty and unemployment are rife.