Hamas has stopped short of claiming responsibility for the rocket fire but one official earlier called it a "deterrent to further Israeli attacks".
In the Saturday afternoon salvo, Palestinians fired more than 60 rockets and mortar shells and sirens wailed frequently in southern Israel.
There were no reports of casualties on either side but the exchange threatened to spark a further conflagration after weeks of tensions along the volatile border.
IDF jets hit several targets in the Gaza Strip including two terror tunnels and Hamas military infrastructure overnight between Friday and Saturday following a grenade attack in which an IDF officer sustained moderate injuries, as well as ongoing aerial arson attacks launched from the Strip.
It was one of the most serious flare-ups of fighting since the 2014 Israel-Gaza war, but Israel's chief military spokesman, Brigadier-General Ronen Manelis, said it was premature to say whether it heralded the start of a broader campaign against militants in the enclave, run by the Islamist movement Hamas. On Friday, after an Israeli soldier was mildly wounded by a Palestinian protester who threw a hand-grenade Israel retaliated by striking "Hamas targets".
"Allowing Hamas to dictate the terms of the ceasefire after two months of arson attacks and hundreds of rockets on the residents of Gaza border communities is a serious mistake".
A Palestinian teenager killed in an Israeli air strike.
The surge in violence followed mounting public criticism of Netanyahu over failure to counter a new Palestinian tactic: incendiary kites and balloons launched from Gaza that have burned crops and scrubland in southern Israel.
Israeli Prime Minister Benjamin Netanyahu chairs the weekly cabinet meeting at his office in Jerusalem
The Israel Defense Forces (IDF) said it had struck facilities used by Hamas, which dominates Gaza, including a battalion headquarters in Beit Lahia, a training camp located in a high-rise building in the al-Shati refugee camp in northern Gaza, weapons storage facilities and rocket launchers.
On Friday, thousands of Palestinians gathered near the Gaza border for their near-weekly protest.
The airstrikes targeted roughly 40 Hamas targets, where rockets and mortars were fired from earlier this weekend.
Molotov cocktails, flaming tyres and stones were also hurled in the direction of its soldiers, according to the Israeli army.
Israel's army said Saturday's strikes targeted military facilities belonging to Hamas.
The IDF spokesman said the aim of the operation was to "restore a sense of security" and that the military would "respond as necessary" to a wide range of scenarios.
The army said it held Hamas responsible for all violence emanating from Gaza, which the terror group has ruled since 2007.
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