Speaking to ministers at the weekly cabinet meeting, the Israeli premier said the almost-nightly military strikes on Gaza could be expanded should the need arise.
His remarks came after a sharp hike in tensions along the border as militant groups have stepped up their fire on southern Israel.
"Over the weekend, the IDF attacked multiple targets in response to firing at Israel from the Gaza Strip. We are ready to expand this operation as per need," Netanyahu said, without elaborating.
"We have seen that, at the end of the day, limited operations only strengthen Hamas so the alternative is clear," he said, repeating his long-held assertion that Israel should re-occupy the Gaza Strip, which it left in 2005.
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Israeli warplanes struck Gaza 12 times overnight, with Palestinian officials saying two people had been lightly injured.
The raids took place after six rockets struck southern Israel yesterday evening, one of which hit a paint factory in Sderot industrial zone, causing an explosion and major fire as the flammable substance ignited, police said.
On Friday, two Palestinians were killed in an Israeli air strike on a car near Gaza City, with the military saying they had been involved in firing rockets at Israel.
Hours earlier, a bomb had exploded along the southern sector of the border, prompting Israeli tanks to open fire towards the southern city of Khan Yunis, injuring five Palestinians, one of them a child.