The Israeli army "neutralised a terror tunnel leading into southern Israel from the vicinity of Khan Yunis", military spokesman Jonathan Conricus told journalists, referring to a city in southern Gaza.
"The tunnel was detonated from within Israel, close to the security fence. The (Israeli army) actions are in light of this grave and unacceptable violation of Israeli sovereignty."
He added, however, that the Israeli military was not seeking a further escalation.
He said the tunnel was still being dug and no opening was found in Israeli territory. The military had been monitoring it for "some time", Conricus said, declining to say when it was first discovered.
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He could not confirm whether the tunnel belonged to Hamas, which runs the Gaza Strip, but said Israel nevertheless holds the Islamist movement responsible for all such activity from the Palestinian enclave.
Conricus said Israel used advanced technology to locate the tunnel, but declined to elaborate.
In April 2016, Israel's military said it had located and destroyed a tunnel extending from the Gaza Strip into Israel in the first such discovery since the devastating 2014 conflict.
Hamas forces have used tunnels in the past to enter Israel and carry out attacks.
Today's operation comes as Palestinian rival factions Hamas and Fatah seek to follow through on a reconciliation deal signed earlier this month and aiming at ending a decade- long rift between them.
Hamas is due to hand control of the Gaza Strip back to the Palestinian Authority by December 1 under the agreement.
Israel has warned that it will not accept a unity government that includes Hamas if it does not disarm and recognise the country, among other demands.
Israel launched its 2014 operation in Gaza with the stated objectives of halting rocket fire and destroying attack tunnels into Israel.
During the war, 32 tunnels were discovered, including 14 that extended into Israel, according to a UN report on the conflict.
It was the third war in Gaza since 2008 and the longest, deadliest and most destructive.
On the Israeli side, 74 people were killed, all but six of them soldiers.
Israeli leaders have been keen to show they are addressing the threat of tunnels from the Gaza Strip.
A state inquiry in February accused Prime Minister Benjamin Netanyahu and top army brass of being unprepared for the tunnels used by Hamas during the 2014 conflict.