Air strikes by the Israeli army since Tuesday have killed fighters as well as civilians, including several children, said officials in the crowded coastal territory.
Rocket fire from Gaza killed one person in the central Israeli city of Rehovot and injured at least two others, Israeli police said.
Cairo mediated in efforts toward a truce between Israel and the Islamic Jihad militant group, while the European Union called for an immediate ceasefire.
"We urge an immediate comprehensive ceasefire which will end Israeli military operations in Gaza and current rocket firing against Israel, which is unacceptable," EU foreign policy chief Josep Borrell said in a statement.
German Foreign Minister Annalena Baerbock hosted her French and Jordanian counterpart for talks in Berlin and said "the bloodletting must end now".
Militants in the Gaza Strip have fired 547 rockets at Israel since Wednesday, the military said, adding that 175 had been intercepted by the Iron Dome missile defence system.
Shops in Gaza were shuttered and the streets largely abandoned as Israeli military aircraft circled over the territory where several buildings lay in ruins.
Islamic Jihad confirmed it has lost five military leaders in strikes in recent days, including Ahmed Abu Deka -- the deputy of Ali Ghali, commander of a rocket launch unit also killed by Israel on Thursday.
The Israeli army said it had fired at 166 targets across Gaza on Thursday.
The militant group, the Popular Front for the Liberation of Palestine, said four of its fighters had been killed.
Israeli Defence Minister Yoav Gallant said he had instructed the security establishment "to take all the measures necessary, to prepare additional actions and maintain readiness for the possibility of increased fire".
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