As dawn broke on Wednesday, air raid sirens sent Israelis rushing to shelters in towns near the Gaza border and deeper in the country.

The Israeli military said its forces targeted a Gaza crew preparing to launch rockets over the border.

At least one man was killed. The Islamic Jihad militant faction identified him as a member of the group.

The worst fighting in months began on Tuesday after Israel killed in Gaza a top commander of the Iran-backed Islamic Jihad, accusing him of masterminding recent attacks against Israel and planning more soon.

In response, Islamic Jihad gunmen fired about 200 rockets into Israel throughout the day.

Further Israeli air strikes on the group's targets in Gaza killed eight Palestinians, seven of them militants, according to Palestinian sources.

However, it appeared that Hamas, the main militant group that rules Gaza, was staying out of the fighting for now.

A diplomatic source told Reuters the UN Middle East envoy was on his way to Cairo to begin mediation to end the violence.

Israel's rare targeted strike on Tuesday, which killed Islamic Jihad's Baha Abu Al-Atta in Gaza, came as Syrian state media said a separate missile attack hit the home of an Islamic Jihad official in Damascus, killing two people including one of his sons.

Syria said Israel carried out the Damascus strike. Israel did not comment.

Israeli Prime Minister Benjamin Netanyahu described Al-Atta as a "ticking bomb" who was responsible for a string of recent cross-border rocket, drone and sniper attacks and was suspected of planning more.

"Israel is not interested in escalation, but we will do everything required to defend ourselves," said Netanyahu, who oversaw Israel's last Gaza war in 2014.

Hamas, the Islamist group that rules Gaza, joined Islamic Jihad in condemning Israel, saying Israel "bears full responsibility for all consequences of this escalation", and pledged Al-Atta's death "will not go unpunished".

Australian Associated Press