IDF forces on Monday afternoon eliminated a two two-man terror squad preparing to launch a medium range rocket into Israel from northern Gaza.
Pilots reported a direct hit shortly after 16:00 hours. However, non-combatants were reportedly injured in the pre-emptive strike.
The IDF spokesperson's office said "this case demonstrates the terrorist groups are using civilians as human shields," and "open fire from the heart of population centers."
Legal experts say mounting rocket strikes from civilian areas is a violation of the rules of war and the onus for civilian casualties rests with the terror groups.
Over 200 rockets have been fired at Israel's southern communities since Friday evening. Monday afternoon's preemptive strike brings the death toll in Gaza from retaliatory raids to 25.
Nonetheless, Gaza terror groups say they will "not be the first to blink" and rocket fire continues unabated.
Prime Minister Binyamin Netanyahu vowed on Monday "we'll hit them," saying the IDF would continue to operate with "great power and aggression."
He has refused to commit to a ground incursion in Gaza, however, and senior members of his government have indicated the IDF will continue to focus on airstrikes.
Defense Minister Ehud Barak said earlier on Monday "if the rocket fire escalates, Israel will continue air strikes against terrorist targets."
Minister of Strategic Affairs and Deputy Prime Minister Moshe Yaalon said "At this point we see no need to enter Gaza, but the possibility exists."
Yaalon has previously called for a major incursion into Gaza, but on Israel's terms at a time of its own choosing.
Israel's top military commanders in recent months have said such an operation is becoming increasingly "inevitable."
Meanwhile, Israel's powerful Foreign Affairs and Defense Committee called on the government to declare a "special situation" in Israel's south in order to provide residents economic relief.
Committee chairman MK Shaul Mofaz told the committee "Gaza is not a nature reserve, and the terrorist leaders must not feel that safe."