Israeli warplanes killed Baha Abu al-Ata with an airstrike in Shejaiyah, near Gaza City.
The Israeli military says Abu el-Atta was the mastermind of recent attacks against it, and responsible for most of the rocket, sniper and drone fire from the region.
Israel killed a senior Islamic Jihad commander in Gaza early Tuesday in a rare targeted killing that threatened to unleash a fierce round of cross-border violence with Palestinian militants.
Gaza's Health Ministry said a man and a woman were killed in an airstrike at a house and two other people were wounded.
The Islamic Jihad said Abu el-Atta, 42, was undergoing "a heroic act" when he was assassinated.
Hamas spokesman Hazim Qasim told MEE: "The Zionist occupation is blamed for the consequences of this assassination and unsafe escalation".
Speaking to MEE, political analyst Adnan abu-Amer said that abul-Ata's killing was the first assassination of a senior Palestinian resistance leader since 2012, when Israel killed the senior leader of Al-Qassam Brigades, Hamas' military wing, Ahmed al-Jaabari.
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In the West Bank, senior Palestinian Authority and PLO official Saeb Erekat said Israel's government "bears full responsibility for the consequences of this crime", in a statement carried by the official PA news site Wafa.
Air sirens sounded in central Israel, warning of possible rocket attacks from Gaza.
Israel also shut down crossing points into Gaza and reduced the permissible fishing area off the territory's coast to 6 nautical miles in anticipation of a looming confrontation and schools were canceled in Israeli communities and towns along the Gaza Strip's boundary and all the way to Tel Aviv, about 90 kilometers (56 miles) north of Gaza.
It adds that the attack on Tuesday morning "will not pass without a punishment".
Medics also resuscitated an 8-year-old girl who lost consciousness during a rocket attack from the Gaza Strip on the city of Holon, though it was not immediately clear if her injuries were related to the rocket fire. Israeli police said they closed some roads on the edge of Gaza as a precaution.
"We are preparing for a number of days of fighting", Israeli military spokesman Jonathan Conricus said.
Conricus said the assassination did not signify "a return to previous policies of what has been termed in the media 'targeted killings'".