Palestinian militant group Hamas has sworn vengeance after 14 of its members were killed in an overnight strike by the Israeli air force on Gaza.
Marchers in Gaza mourn the Hamas militants killed on Tuesday
Tens of thousands turned out for their funerals on Tuesday, as schools and shops stayed shut as a mark of respect.
Palestinian Prime Minister Ahmed Qurei said that there would be a Palestinian response and that when it came it would be justified.
Israel has said its raid targeted Hamas fighters training to carry out attacks.
Palestinian mortars and rockets struck Jewish settlements in Gaza in apparent retaliation.
Hamas said it was behind a rocket attack on the Israel town of Sderot which, according to local authorities, slightly wounded one person.
The militant group had said it carried out two suicide bombings in the Israeli city of Beersheba last week that left 16 people dead.
Early on Tuesday, Israeli missiles hit a sports ground named after Hamas' assassinated spiritual leader Sheikh Ahmed Yassin in the city's eastern Shajaiyeh district, reputedly a stronghold of the militant group.
Israeli forces said in a statement they had "targeted a training field during training of Hamas terrorists".
The attack ranks as one of the hardest blows that Israel has dealt Hamas since the Palestinian uprising began in late 2000, the BBC's Alan Johnston in Gaza says.
Mr Qurei said retaliation by Hamas for the Israeli strike would be justified.
"No crime goes unpunished. For sure there will be retaliation, and the retaliation will be justified if it happens," he said at a meeting of the Palestinian cabinet.
Israeli officials said the troops did the right thing, saying they struck at militants receiving the kind of military training that threatens Israeli citizens.
"This is a clean military operation against terrorist targets. All those hit are members of the Hamas, who is responsible for many murderous terrorist activities in Israel," Israeli government spokesman Avi Pazner said.
Sharon's Gaza plan
Hamas leaders based in Damascus, Syria, have meanwhile been on the move following warnings they could be attacked by Israeli forces, according to Israel's Defence Minister Shaul Mofaz.
Earlier this year, Israeli forces assassinated both Sheikh Yassin and his successor, Abdelaziz al-Rantissi.
Hamas has said the twin suicide attacks on Beersheba were carried out in retaliation for the killing of its leaders.
The Gaza Strip has been occupied by Israel since it captured the territory from Egyptian control in the 1967 war.
Israeli Prime Minister Ariel Sharon is planning to pull all its 7,000 settlers from Gaza and the troops that protect them as part of a disengagement plan. Israel will maintain control of Gaza's borders, coastline and airspace.