Israeli Prime Minister Ehud Olmert has ordered a resumption of military strikes against Palestinian militants firing rockets from Gaza into Israel.
The decision came after a rocket attack injured two Israeli boys
Mr Olmert said troops had been instructed to "take pinpoint action against rocket-launching squads" after two Israeli boys were hurt in a strike.
But he said Israel would continue to maintain the month-long ceasefire that halted fighting in the Gaza Strip.
The Hamas-led Palestinian government, also said the truce remained intact.
"We believe this agreement is still alive and both sides should respect it," Ghazi Hamad, a Hamas spokesman, said.
The international community has urged Mr Olmert to keep the ceasefire alive, but he has come under growing domestic pressure to respond to the rocket attacks, which have been increasing.
The Israeli military said seven rockets in all were fired on Tuesday, one of which seriously injured two teenage boys in Sderot.
The Palestinian Islamic Jihad group said it carried out the attack in retaliation for recent Israeli military raids in the West Bank.
The 26 November truce was called to halt five months of violence that began after militants killed two Israeli soldiers and captured another in an attack on an army post.
Since then, more than 60 rockets have been fired into Israel, the Israeli military says. Israel has killed more than a dozen Palestinians, mainly gunmen in the West Bank.
Israel would "work with the Palestinian Authority so that immediate steps are taken to halt the Qassam (rocket) firings", Mr Olmert said in a statement after a meeting with security chiefs.