Israeli aircraft hit two Hamas targets in Gaza early on Saturday in response to rocket fire as the worst flare-up of violence since a 2014 war entered a fourth day.
There was no immediate claim of responsibility for the rocket attack, but Israeli analysts believe Hamas is directly behind the latest flare up.
"Earlier today (Saturday)... a rocket was fired from the Gaza Strip at southern Israel," the army said in a statement.
"In response... aircraft targeted two Hamas terror infrastructures in the southern Gaza Strip."
Hamas security sources said the retaliatory raid hit two brickworks in the southern city of Khan Yunis, causing damage but no casualties.
But witnesses said two missiles hit a base of Hamas's military wing east of the city, causing significant damage.
It was the fourth day of the worst cross-border violence since the 50-day war between Israel and Hamas in 2014.
Mortar fire by Palestinian terrorists and Israeli air strikes and shelling have raised concerns for the future of an informal truce that has held since the conflict ended.
Since Wednesday, Hamas and other terrorist groups have fired at least 12 mortar rounds at Israeli forces searching along the border, and short distances inside Gaza, for infiltration tunnels leading into Israel.
The Israeli army said it had "no interest whatsoever" in a military escalation, but would continue to act against Hamas as "it continues to breach Israeli sovereignty and build tunnels."
Hamas's Gaza leader, Ismail Haniya, said on Friday that the group was "not calling for a new war", but would not accept Israeli incursions into Gaza.
A former head of Israel's Shin Bet internal security agency, Yaakov Perry, said that Hamas was fearful of losing the tunnel network, which was one of its proudest military achievements.
Hamas "is using mortar fire to communicate that fear to Israel," he said.
Perry, who is now a member of parliament for the centrist opposition Yesh Atid party, urged the government to avoid adopting a purely military response and to take steps to improve the lives of Gaza's residents.
"It would be good if in addition to the determined operational activities against the tunnels, Israel would take measures to improve the economic situation and provide options that would show Gazans the possibility of an easier and better future," he said.
AFP contributed to this report.