Israeli Prime Minister Ehud Olmert has ordered the military to intensify its actions in Gaza to secure the release of a captured Israeli soldier.
Mr Haniya's office was destroyed in an overnight attack
Mr Olmert said he had instructed Israel's forces "to do everything" to free 19-year-old Cpl Gilad Shalit.
Hamas's armed wing said it would resume attacks against civilian targets inside Israel if its raids on Gaza continued.
The Palestinian prime minister has called for international intervention to help end Israel's offensive.
Ismail Haniya urged the "international community and the Arab League to take its responsibilities towards our people and intervene" to end what he called Israel's "insane policy", AFP quoted him as saying.
Mr Haniya was speaking hours after an Israeli air strike destroyed his offices in Gaza City.
At a weekly cabinet meeting on Sunday morning, Mr Olmert said Israel would intensify pressure on the Hamas-led Palestinian government to release Cpl Shalit, believed held by three militant groups in Gaza since his capture one week ago.
"I have instructed the security establishment and the IDF [army] to increase the strength of their actions in order to pursue these terrorists, those who dispatch them, their ideologues and those who sponsor them," he was quoted as saying by AFP.
The BBC's Nick Thorpe in Jerusalem says it is not clear what "intensify" might mean in this context.
Egypt has been in talks with Palestinian militants for days to try to obtain Cpl Shalit's release but has so far yielded no apparent results.
However in a counter-statement the armed wing of Hamas threatened to resume attacks inside Israel.
It condemned the Israeli air raids, which have included strikes on targets such as bridges, a school and a university campus. The Israelis have also hit Gaza's only power plant.
"If [Israel] continue with these attacks [on Gaza] we will strike similar targets in the Zionist Occupation which we have not targeted until now," Abu Ubaida, a spokesman for Hamas's Izzedine al-Qassam Brigades, was quoted by Reuters news agency as saying.
GAZA CRISIS TIMELINE
Sun 25 June: Cpl Gilad Shalit captured in cross-border attack
Mon 26 June: Palestinian Popular Resistance Committees demand prisoner releases in exchange for Shalit
Weds 28 June: Israeli military enters southern strip after launching air strikes on Gaza
Thurs 29 June: Israel detains dozens of Hamas officials
Sat 1 July: Groups believed to be holding Cpl Shalit demand 1,000 prisoners be released
In the past Hamas suicide bombers have struck many times in cities like Tel Aviv, but these kind of attacks inside Israel ended nearly two years ago.
The BBC's Alan Johnston in Gaza says the threat to resume them now might turn out to be no more than rhetoric but it will be taken as another sign of a further hardening of the mood here as the crisis surrounding the captured soldier escalates.
In an overnight attack, Israeli helicopters fired two missiles into the Palestinian prime minister's office, setting it ablaze, witnesses said.
In a gesture of defiance, Mr Haniya, who inspected the damage with Mr Abbas, held a cabinet meeting in what was left of the site.
Israeli government spokesman Mark Regev said the office was attacked as a warning to the Hamas leadership.
"It was a symbolic move because it was done at night and the office was vacant and no-one was hurt," he told the BBC.
"I think we wanted to send a message. [Ismail Haniya] is one of the leaders of Hamas, and we believe that he is responsible for what his organisation does and that when he says he knows nothing about this, I'm afraid we think it's being disingenuous."
In a separate strike, Palestinian officials said a 34-year-old militant died when Israel targeted Hamas facilities in northern Gaza, marking the second such fatality since Israel began its campaign on Tuesday night.
On Sunday Israel temporarily re-opened its main cargo crossing into Gaza, allowing food, fuel and medical supplies to be sent in.
Israeli troops remain entrenched in south-east Gaza, where they entered last Wednesday in the first such offensive there since Israel pulled its troops and settlers out last September.
Israel has built up a large force on the border of the northern Gaza Strip but has yet to order its advance.