Israeli PM Ariel Sharon has vowed "wide-ranging and ceaseless" operations against Palestinian militants after the first suicide bombing in two months.
Five Israeli were killed and 30 injured in the Hadera attack
Five Israelis died in an attack claimed by the militant Palestinian group Islamic Jihad in the northern Israeli town of Hadera on Wednesday.
The group said it carried out the attack to avenge the killing of one of its leaders by Israel on Monday.
As Mr Sharon spoke, Israeli forces were entering the West Bank town of Jenin.
Officials had already approved plans to carry out a military operation against Islamic Jihad, and one report said the troops had surrounded the house of one of the group's leaders.
Mr Sharon specifically criticised the Palestinian Authority for not "taking any serious measure in the fight against terrorism".
He and Defence Minister Shaul Mofaz decided on Wednesday night to target the group and eliminate its infrastructure, officials said.
"Islamic Jihad has declared war on every Israeli civilian and of course we're 100% entitled to take the appropriate action to defend our civilians," Israeli Foreign Ministry spokesman Mark Regev said.
Early on Thursday, Israeli military planes launched strikes in the Gaza Strip for a third night, but no casualties were reported.
The Israeli military said two of the attacks targeted access routes into Gaza City and Beit Hanun. Witnesses and Palestinian security sources also said that a missile had been fired at open fields in the Beit Hanun area.
Wednesday's attack in Hadera was the first bomb attack in Israel since 28 August, when a suicide bomber blew himself up at the entrance to Beersheba's central bus station, wounding 20 people.
The blast happened near a food stand in the town's busy market place. Palestinian leader Mahmoud Abbas condemned the attack, saying "it is against our interests and it only increases the violence in this region."
Israeli police said a suicide bomber walked into the market in Hadera, detonating his explosives at a falafel stand near the town's central bus station at around 1600 (1400GMT).
As well as those killed, 30 Israelis were injured in the bombing.
Mr Abbas vowed that the Palestinian Authority would "increase its efforts to ensure the continuation of the truce because it is in the interest of both the Palestinian and the Israeli peoples."
Palestinian militant groups agreed to a ceasefire in February, and there has been relative calm since Israel withdrew from the Gaza Strip in August.
But Islamic Jihad spokesman Khader Habib told the AP Wednesday's attack was a "natural retaliation" for the Israeli attack on Luay Saadi in the West Bank on Monday.