The rocket barrage, which was the heaviest since an eight-day conflict between Israel and Gaza's Hamas rulers in November 2012, sent thousands of Israelis fleeing for cover across the south yesterday afternoon.
So far, there have been no reports of casualties on either side of the border.
And experts said Israel was not interested in a major confrontation with Gaza's Hamas rulers.
The latest tit-for-tat violence was sparked by an incident on Tuesday when militants of the hardline Islamic Jihad group fired a mortar round at troops allegedly trying to enter southern Gaza, prompting an Israeli air strike which killed three of them.
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Israel responded with air strikes on 29 targets across Gaza, hitting bases used by Hamas as well as those of Islamic Jihad, which has so far claimed all of the rocket fire.
Security sources in Gaza said there were no casualties in the air strikes as all the sites had been evacuated.
The army said more than 60 rockets had struck southern Israel yesterday, five of them hitting populated areas. Another three were intercepted by the Iron Dome air defence system.
"Two rockets were fired, one north of Ashkelon, the second south of Ashdod, landing in open areas," police spokesman Micky Rosenfeld said.
Defence Minister Moshe Yaalon blamed both Islamic Jihad and Hamas for the escalation and said anyone firing at Israel would be responsible for his own fate.
"Hamas is responsible for the strip and if it does not know how to prevent fire on Israel from its territory, we will act against it and all of its broader interests," he said.