Hamas considered Mr Rayyan to be a political leader, but he often wore a military uniform and was close to the group's armed wing.
Until now, political leaders have not been killed.
The BBC's Mike Sergeant, in Jerusalem, says this may further strengthen the determination of Hamas to resist the Israeli air assault.
But it will also be seen as an indication that the Israeli military can target key members of the Hamas leadership - the people Israel says are responsible for the rockets being fired towards Israeli towns, our correspondent adds.
Four Israelis have been killed by Palestinian rockets fired into Israel since Saturday.
On Wednesday, Mr Rayyan had promised that Hamas would hit Israel "even deeper" than it has so far.
On the Hamas-run al-Aqsa television channel, he said Hamas militants were preparing for any Israeli ground incursion, saying "we will kill the enemy and take hostages".
Israeli planes and helicopters have bombed Gaza for six days
At least nine other people, some said to be members of Mr Rayyan's family, were also killed in the air raid on his home in the Jabaliya refugee camp in the north of the Gaza Strip.
The deaths come as the main UN agency operating in Gaza, Unwra, has resumed food deliveries, but warned of a dire humanitarian situation in the territory.
The UN says at least 25% of the 402 Palestinians killed were civilians; Palestinian medical officials say more than 2,000 people have been injured.
Israel is refusing entry to Gaza for international journalists and has declared the area around it a "closed military zone", leading to speculation a ground offensive into the tiny coastal strip could be imminent.
Both Israel and Hamas have ignored international calls for a ceasefire.
Israeli Foreign Minister Tzipi Livni said there was no need for a ceasefire on humanitarian grounds as more lorries containing aid were entering Gaza than before the conflict began last Saturday.
Speaking in Paris after talks with French President Nicolas Sarkozy, she said Hamas had used the previous six-month truce, which ended mid-December, to re-arm.
Tzipi Livni says Hamas is a problem for all Palestinians
"Another thing which is important to understand is that Israel accepted a truce a few months ago that was initiated by Egypt, but during the few months of the truce Hamas violated the truce, and they used it in order to get missiles with a longer range."
Hamas has said Israel must stop bombarding Gaza and lift its blockade of the territory before it will consider a ceasefire.
Mr Sarkozy is travelling to the Middle East next week in an attempt to find a way to end the crisis.
A draft UN resolution put forward by Egypt and Libya failed after the US and UK complained that it called on Israel to ends its air assaults but made no mention of Hamas rocket attacks against Israel, which they say started the latest hostilities.
For the current violence to end, Israel needs to show that it has stopped the rocket fire, says the BBC's Middle East Editor, Jeremy Bowen.
But if Hamas can still resist, its leaders will feel they can claim victory. Hamas believes that its fighters who are launching rockets into Israel are taking part in legitimate resistance against an occupier, he adds.
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