The military said it struck about 200 Hamas targets on the second day of its offensive, which it says is needed to end incessant rocket attacks out of Gaza. Militants, however, continued to fire rocket salvos deep into Israeli territory, and Israel mobilized thousands of forces along the Gaza border ahead of a possible ground operation.
"The army is ready for all possibilities," Prime Minister Benjamin Netanyahu said after holding a meeting of his Security Cabinet. "Hamas will pay a heavy price for firing toward Israeli citizens. The security of Israel's citizens comes first. The operation will expand and continue until the fire toward our towns stops and quiet returns."
The fighting stepped up as Egypt, which often serves as a mediator between Israel and the Palestinians, said it was in contact with both sides to end the violence. It was the first indication since the offensive was launched on Tuesday that cease-fire efforts might be under way.
The offensive has set off the heaviest fighting between Israel and the Islamic militant group Hamas since an eight-day battle in November 2012. Israel says its aim is to quash Hamas' militant capabilities and to quell rocket fire.
Israeli leaders warned a ground invasion could be imminent.
"Despite the fact it will be hard, complicated and costly, we will have to take over Gaza temporarily, for a few weeks, to cut off the strengthening of this terror army," Yuval Steinitz, Israel's intelligence minister, told Israel Radio. "If you ask my humble opinion, a significant operation like this is approaching."
The government has authorized the army to activate up to 40,000 reservists for a ground operation. An Israeli government official, speaking on condition of anonymity because he was discussing Israeli tactical strategy, said the reservists would be sent to the West Bank to allow active duty troops to amass near the Gaza border.
Since the offensive began Tuesday, Israel has attacked at least 560 sites in Gaza, killing at least 41 people, the army said. Militants have fired more than 160 rockets at Israel.
"We will not stop. They'll first receive a hard blow from air and sea, and if a ground invasion is needed, there will be a ground invasion," said Israel's Minister of Internal Security, Yitzhak Aharonovitz.
Gaza health official Ashraf al-Qidra said at least 14 people were killed in Wednesday's airstrikes, including two militants. An 80-year-old woman was among the dead. In all, 35 Palestinians have been killed.
Israel's army said its targets included a senior member of the Islamic Jihad militant group. Islamic Jihad confirmed one of its members was killed, along with his mother and four siblings.
Hamas official Musheer al-Masri said Israel had "crossed all the red lines" and warned that Hamas would strike back fiercely. "What the resistance showed today is only part of what it is capable of," he said.
Israel and Hamas are bitter enemies and have fought numerous times over the years. But until recently they had been observing a truce that ended the previous hostilities in 2012.
About 2,000 people attended a funeral for eight Palestinians, including at least one militant, four adults and two children, who were killed Tuesday.
In a statement, the Egyptian president's office said President Abdel-Fattah el-Sissi received a call from Palestinian President Mahmoud Abbas on Tuesday evening to review the latest developments.
Abbas, who has minimal influence in Gaza, has appealed to Israel to halt its offensive. "Egypt has made extensive contacts with all active and concerned parties to spare the Palestinian people the scourge of Israeli military operations," el-Sissi's office said. It did not elaborate.
It was not clear whether the contacts included formal efforts to reach a cease-fire, or whether Egypt was speaking to Hamas. The new Egyptian government has poor relations with Hamas.
Tensions have been rising since the kidnapping of three Israeli teenagers in the West Bank on June 12. Israel accused Hamas of being behind the abductions, although it provided no proof.
Israel then launched a crackdown on the group's members in the West Bank and arrested hundreds of people. Hamas, which controls Gaza, responded by stepping up rocket fire.
The situation deteriorated last week after the bodies of the three were found, followed a day later by the abduction of Palestinian teenager in Jerusalem - who was later found burned to death in what Palestinians believe was a revenge attack. Six Jewish Israelis were arrested in the killing.
Hamas is far weaker than the last round of fighting with Israel in 2012.
At the time, Egypt was governed by the Muslim Brotherhood, Hamas' close ally. Following its ouster in 2013, Egypt's new government became hostile to Hamas and closed a network of smuggling tunnels used by the group as an economic lifeline, and as a way to smuggle in rockets.
An Israeli government official, speaking on condition of anonymity because he was discussing Israeli tactical strategy, said Israel could make more significant achievements against Hamas now than in previous rounds of fighting.
"Things are different now," the official said. "Their ability to rebuild their arsenal is far more limited."