Israel has carried out a missile attack on a Palestinian militant in Gaza City, a day after two suicide bombings killed 15 people in Israel.
Hamas threatened to attack Israeli homes after the raid
Israeli missiles targeted the home of Mahmoud Zahar - a senior member of Hamas - killing his son and bodyguard and leaving about 25 people injured.
Mr Zahar himself escaped with minor injuries.
The military wing of Hamas later threatened to attack "houses and tower blocks" in Israel in retaliation for the air strike.
The raid on Gaza City was also condemned as "cowardly" by Palestinian parliamentary speaker Ahmed Qurei, who on Wednesday confirmed that he had agreed to serve as prime minister.
"President Yasser Arafat asked me to be the prime minister and I have accepted," he told reporters in the West Bank town of Ramallah.
Mr Qurei, widely known as Abu Ala, replaces Mahmoud Abbas, who resigned last week amid tensions with Mr Arafat over control of the Palestinian security forces.
Israeli Prime Minister Ariel Sharon cut short a visit to India to fly home and deal with the latest violence, which has seriously undermined the US-backed peace plan, known as the roadmap.
Mr Sharon said there could be no progress in the peace process with the Palestinians unless "terror" came to a complete halt.
The latest Israeli strike caused extensive damage to a mosque, and left huge plumes of smoke rising from Mr Zahar's neighbourhood. Our correspondent says he has now gone into hiding.
US President George W Bush insisted on Wednesday that "the roadmap is still there," despite the latest bloodshed.
Speaking of Mr Qurei, he said: "His job, if he's interested in a two-state solution, is to consolidate power within his administration, to get the security forces under control, all the security forces, and then unleash those security forces against the killers".
The White House also called on the new Palestinian leadership to "state clearly its opposition to all form of terrorism".
Israel was stunned by Tuesday's two suicide attacks, which killed 15 Israelis.
The military wing of Hamas on Wednesday claimed responsibility for the twin bombings, describing them as revenge for Israeli attacks.
Hours after a suicide bomber set off explosives at a crowded bus stop near Tel Aviv, another bomber detonated a device outside a cafe in Jerusalem.
The first bombing took place outside Tsrifin army base, in the Tel Aviv suburb of Rishon Letsion, killing eight people waiting at a bus stop and injuring around 30.
The second suicide bombing was in the heart of west Jerusalem, at the crowded Cafe Hillel, on one of the liveliest streets in the city.
Seven people as well as the bomber are believed to have died in that attack and about 30 were wounded, rescue workers and witnesses said.
Among those killed was Doctor David Applebaum, the head of the emergency unit at one of Jerusalem's main hospitals. His daughter, who was just days away from getting married, also died.
For the past year, Dr Applebaum, an American immigrant, had been helping save the lives of people injured by suicide attacks.
The Israeli Government accused Yasser Arafat's Palestinian Authority (PA) of "failing totally" to meet its peace process obligation to control militants.
"Now Israel will do what is necessary," said Dore Gold, a spokesman for the Israeli prime minister.