There has been widespread international condemnation of the assassination of Sheikh Ahmed Yassin, the founder of the militant group Hamas.
Sheikh Yassin's assassination sparked protests in the Arab world
The paraplegic cleric, who Israel says masterminded suicide bombings, was targeted in Gaza. His death sparked calls for revenge by Hamas.
The US refused to condemn the attack, but called it "deeply troubling."
Israeli Defence Minister Shaoul Mofaz said that the policy of "liquidating terrorists" would continue.
He said Hamas was a "strategic enemy of Israel and should be destroyed".
Late on Monday, Israeli armoured vehicles moved into the northern Gaza Strip, after rocket attacks.
The Israeli military said at least four rockets had been fired by Palestinians militants into Israel.
No casualties were reported, and so far there have been no clashes in northern Gaza.
UN Secretary General Kofi Annan condemned the attack, saying it was against international law and did nothing to further the Middle East peace process.
UK Foreign Secretary Jack Straw said the killing was "unjustified" and "very unlikely to achieve its objective".
France also joined in the condemnation, and European Union foreign policy chief Javier Solana said it was "very, very bad news" for the peace process.
In the United States, the Bush administration has said it was "deeply troubled" by the killing, and US officials have denied any advance knowledge of Israeli plans to target the Hamas leader.
But the Americans refused to condemn the killing outright, appealing instead for calm and restraint.
Sheikh Yassin was leaving a mosque in Gaza's Sabra district in his wheelchair with an entourage when they were attacked by Israeli helicopter gunships at dawn on Monday.
At least seven other people were killed in the attack.
More than 100,000 people joined his funeral procession in Gaza City, chanting slogans such as "death to Israel", "death to America", and "Sharon prepare the body bags".
Israeli Prime Minister Ariel Sharon congratulated the Israeli security forces for conducting a successful operation and vowed to continue Israel's policy of targeting militant leaders.
He said Sheikh Yassin was an "arch-terrorist" who plotted attacks that killed hundreds of Israelis.
Hamas, the largest Palestinian militant Islamist organisation, is opposed to peace negotiations and the existence of Israel.