Israeli ground troops have attacked Gaza as its air force bombarded targets and officials ordered everyone living within miles of the border to go to bunkers amid fears of fierce retaliation from Hamas.
Fears of an all-out war escalated in the early hours of Friday morning as the military said just after midnight that air and ground forces were attacking the Hamas-run enclave. Rocket barrages from Gaza swiftly followed.
Its statement gave no further details but military affairs correspondents who are briefed by the armed forces said it was not a ground invasion, and that troops were firing artillery from Israel's side of the border, rather than there being boots on the ground.
Residents in northern Gaza, near the Israeli frontier, said they had seen no sign of Israeli ground forces inside the enclave but reported heavy artillery fire and dozens of air strikes.
There was confusion when the Israel Defense Force (IDF) tweeted from its official account on Thursday night: 'IDF air and ground troops are currently attacking in the Gaza Strip.'
This seemed to be reinforced by military spokesman Lt Col Jonathan Conricus, who said: 'There are ground troops attacking in Gaza, together with air forces as well.'
However, the IDF then clarified just two hours later that its troops had not entered the Gaza Strip as it had earlier stated, blaming an 'internal communication' problem for the confusion.
Prime Minister Benjamin Netanyahu, meanwhile, posted: 'I said that we would charge a very heavy price from Hamas.
'We do it and we will continue to do it with great intensity. The last word was not said and this operation will continue as long as necessary.'
Hamas military spokesman Abu Obeida said the group was not afraid of a ground invasion, saying the move would be a chance 'to increase our catch' of dead or captive soldiers.
It is not yet clear if any offensive will be to destroy rocket sites or Hamas leaders or part of an extended campaign to invade Gaza.
Earlier Israel called up 9,000 reservists to bolster its forces as it deployed troops to the border in preparation for the ground assault.
Relentless air strikes continued to decimate Hamas strongholds in the Strip on Thursday as their brigades held funerals for slain commanders, including the terror boss of Gaza City and their intelligence chief.
Meanwhile three rockets were fired from southern Lebanon towards northern Israel but reportedly fell into the Mediterranean without injuring anyone.
Local media said they were fired by one of the Palestinian factions in Lebanon and that it was not the start of Hezbollah getting involved in the conflict.
Prime Minister Netanyahu is facing the prospect of a war on two fronts as internal rioting by Jewish and Arab mobs descended into 'lynchings' in the worst civil unrest for decades.
Hamas requested a ceasefire on a 'mutual basis' late on Wednesday after firing more than 1,600 rockets into densely populated Israeli neighbourhoods, killing seven civilians including a five-year-old boy.
Netanyahu rejected the peace offering despite growing international alarm at the rising civilian death toll after over 600 air strikes on Hamas targets - 103 Palestinians have been killed, including 27 children and 11 women.