Dozens of gunmen from the Palestinian militant group Hamas have infiltrated southern Israel from the Gaza Strip in a surprise attack.
Videos being shared on social media appeared to show Palestinian militants shooting at passers-by in the streets of the Israeli town of Sderot.
Intense Palestinian rocket fire from Gaza also killed one Israeli woman.
Israel's defence minister said Hamas had "made a grave mistake and launched a war" against his country.
"[Israeli] troops are fighting the enemy at every location," Yoav Gallant added. "The State of Israel will win this war".
The Israel Defense Forces (IDF) said it had moved to a war footing and that dozens of fighter jets were carrying out air strikes on Hamas sites in Gaza.
The rocket barrages from Gaza - which is governed by Hamas - began just after dawn on Saturday, at the end of the Jewish holiday of Sukkot.
As sirens sounded across Israel, the IDF announced that "terrorists" had infiltrated Israeli territory "in a number of different locations".
It told civilians in southern and central areas to stay next to shelters, and inside shelters in the area surrounding Gaza.
Footage posted online appeared to show a group of heavily armed Palestinian militants dressed in black fatigues driving around Sderot in a pick-up truck.
In one video, the same militants seemed to be exchanging fire with Israeli forces on the streets of the town, which is only 1.6km (1 mile) from Gaza.
There are also unconfirmed reports in the Palestinian media that a number of Israelis have been taken captive by militants and footage circulating of Palestinians in Gaza driving Israeli military vehicles.
The rocket barrages meanwhile continued throughout Saturday morning, with Israeli media reporting that more than 2,200 projectiles had so far been launched towards Israel.
An initial report from Israel's Magen David Adom ambulance service said one person had been killed in the rocket attacks and 16 others wounded, two of them seriously.
But a hospital in the southern city of Ashkelon later said it was treating 68 casualties alone, while another hospital in Beer Sheva reported 80 others.
A senior Hamas military commander announced the start of the operation in a broadcast on Hamas media, calling on Palestinians everywhere to fight.
"This is the day of the greatest battle to end the last occupation on earth," Mohammed Deif said.
Latest Stories
-
George Twum-Barimah-Adu pledges inclusive cabinet with Minority and Majority leaders
10 mins -
Labourer jailed 5 years for inflicting cutlass wounds on businessman
11 mins -
Parliament urged to fast-track passage of Road Traffic Amendment Bill
11 mins -
Mr Daniel Kofi Asante aka Electrician
12 mins -
Minerals Commission, Solidaridad unveils forum to tackle child labour in mining sector
17 mins -
Election 2024: Engagement with security services productive – NDC
18 mins -
‘Let’s work together to improve sanitation, promote health outcome’ – Sector Minister urges
20 mins -
Ellembelle MP cuts sod for six-unit classroom block at Nkroful Agric SHS
23 mins -
‘I’ll beat the hell out of you if you misbehave on December 7’ – Achiase Commanding Officer
25 mins -
AFPNC leads the charge on World Prematurity Day 2024
31 mins -
Court remands unemployed man over theft of ECG property
37 mins -
Election security rests solely with the police – Central Regional Police Command
39 mins -
NCCE engages political youth activists at Kumbungu on tolerance
40 mins -
‘In Mahama’s era students lacked chalk, but are now receiving tablets’ – Bawumia
49 mins -
Project commissioning not a ploy to attract votes – Oppong Nkrumah
51 mins