Israeli forces killed seven Palestinians in the Gaza Strip on Sunday in air strikes and an undercover raid that Hamas said targeted one of its commanders and the Israeli military said left one of its officers dead.
Interior & National Security Spokesman Ministry in Gaza Iyad al-Bazm said in a press statement that the security and police forces in the sector imposed intensive security measures in all areas east of Khan Younis south of the Gaza Strip.
Israel's military confirmed that there had been an exchange of fire "during operational activity" and said all its soldiers were now back in Israel.
Rocket-warning sirens were later sounded in southern Israel.
It said that militants then launched 17 rockets from Gaza toward Israeli communities, where school and train service was cancelled in response, and that it had reinforced troops and its aerial defense system along the border following the flare-up.
A spokesman for Hamas, the militant Islamist group which dominates Gaza, described the incident as a "cowardly Israeli attack".
One Israeli soldier has been killed along the Gaza border in that time.
"We held serious discussions", he said ahead of his flight to Paris to join world leaders marking the centenary of the end of World War I.
The sudden, late-night burst of violence comes as Israel and Hamas had appeared to be making progress towards minimising months of border violence.
A Hamas official said violence erupted when a group of its members were fired upon by a passing vehicle belonging to Israel forces.
Hamas militants then pursued the auto as it raced back to Israel, prompting Israeli air strikes that killed "a number of people".
"Every action, without exception, has a price", he said. Qassam members discovered the auto and chased it, prompting Israeli airstrikes that killed several people, the group said.
Israeli Prime Minister Benjamin Netanyahu has defended allowing Qatar to transfer millions of dollars to Hamas-run Gaza despite criticism from within his own government over the move aimed at restoring calm after months of unrest.
The Israeli military chief, Lt. Gen. Gadi Eisenkot said a "special force" carried out "a very meaningful operation to Israel's security", without elaborating.
Hamas said the Israeli actions dealt a blow to Egyptian, Qatari and United Nations efforts to broker a long-term ceasefire between the Palestinian group and Israel and ease an Israeli blockade that has deepened economic hardship in Gaza.
The Palestinian Health Ministry said six people, including at least five militants, were killed and seven others wounded.
A total of $90 million is to be distributed in six monthly instalments, Gaza authorities said, primarily to cover salaries of officials working for Hamas. "All IDF soldiers back in Israel".