The unprecedented assault sparked protests and condemnations throughout the Arab world, and many of Israel's Western allies urged restraint, though the U.S. blamed Hamas for the fighting.
But there was no end in sight. The first round of strikes began around noon Saturday followed by successive waves of attacks that continued into the early hours Sunday.
Israel warned it might go after Hamas' leaders, and militants kept pelting Israel with rockets - killing at least one Israeli and wounding six.
Hundreds of Israeli infantry and armored corps troops headed for the Gaza border in preparation for a possible ground invasion, military officials said, speaking on condition of anonymity under army guidelines.
Prime Minister Ehud Olmert said late Saturday that the goal was "to bring about a fundamental improvement in the security situation." He added, "It could take some time."
The Israeli airstrikes caused widespread panic and confusion, and black plumes of smoke billowed above the territory, ruled by the Islamic militant Hamas for the past 18 months. Some of the Israeli missiles struck in densely populated areas as students were leaving school, and women rushed into the streets frantically looking for their children.
"My son is gone, my son is gone," wailed Said Masri, a 57-year-old shopkeeper, as he sat in the middle of a Gaza City street, slapping his face and covering his head with dust from a bombed-out security compound nearby.
He said he had sent his 9-year-old son out to purchase cigarettes minutes before the airstrikes began and could not find him. "May I burn like the cigarettes, may Israel burn," Masri moaned.
Militants often operate against Israel from civilian areas. Late Saturday, thousands of Gazans received Arabic-language cell-phone messages from the Israeli military, urging them to leave homes where militants might have stashed weapons.
The offensive began eight days after a six-month truce between Israel and the militants expired. The Israeli army says Palestinian militants have fired some 300 rockets and mortars at Israeli targets over the past week, and 10 times that number over the past year.
"There is a time for calm and there is a time for fighting, and now is the time for fighting," said Israeli Defense Minister Ehud Barak, vowing to expand the operation if necessary.
In Gaza City's main security compound, bodies of more than a dozen uniformed Hamas police lay on the ground. Civilians rushed wounded people in cars and vans to hospitals because there weren't enough ambulances to transport all the dead and wounded.
"There are heads without bodies .... There's blood in the corridors. People are weeping, women are crying, doctors are shouting, " said nurse Ahmed Abdel Salaam from Shifa Hospital, Gaza's main treatment center.
Military officials said aircraft released more than 100 tons of bombs in the first nine hours of fighting, focusing initially on militant training camps, rocket-manufacturing facilities and weapons warehouses that had been identified in advance.
A second wave was directed at squads who fired about 180 rockets and mortars at Israeli border communities. Palestinians said Israeli bombs destroyed a mosque early Sunday. The military called it a "base for terrorist activities."
Another target early Sunday was the Al Aqsa TV station used by Hamas. Its studio building was destroyed, but the station remained on the air with a mobile unit. Palestinians counted about 20 airstrikes in the first hours of Sunday.
Israeli Foreign Minister Tzipi Livni said Hamas' political leaders could soon be targeted. ""Hamas is a terrorist organization and nobody is immune," she declared.
The campaign was launched six weeks before national elections. Livni and Barak hope to succeed Ehud Olmert as prime minister, and the outgoing government has faced pressure to take tough action. Gaza's political leaders, who have been targeted in the past, went into hiding earlier this week. In a speech broadcast on local Gaza television, Hamas' prime minister, Ismail Haniyeh, declared his movement would not be cowed.
"We are stronger, and more determined, and have more will, and we will hold onto our rights even more than before," Haniyeh said. It was not clear where he spoke.
In Damascus, Syria, Hamas' top leader, Khaled Mashaal, called on Palestinians to rekindle their fight against Israel. "This is the time for a third uprising," he said.
Israel withdrew its troops and settlers in 2005 after crushing the second Palestinian uprising, but it has maintained control over the territory's border crossings.
Despite the overwhelming show of force, it was not clear the offensive would halt the rocket fire. Past operations have never achieved that goal.
Late Saturday, Gaza health official Dr. Moaiya Hassanain said 230 Palestinians were killed and more than 400 were wounded.
The lone fatality in Israel was in the town of Netivot, where a rocket killed an Israeli man. Six other people were wounded, rescue services said.
Netivot only recently become a target, and dozens of stunned residents, some weeping, gathered at the house that took the deadly rocket hit. A hole gaped in one of the walls, which was pocked with shrapnel marks.
"We need to finish this once and for all and strike back hard," said next-door neighbor Avraham Chen-Chatam, 57.
Streets were nearly empty in Sderot, the Israeli border town pummeled hardest by rockets. But dozens of people congregated on a hilltop to watch the Israeli aerial attacks.
The TV images of dead and wounded Gazans inflamed Arab public opinion, and protests erupted in Arab Israeli villages, the West Bank and elsewhere in the Arab world.
The campaign embarrassed moderate Arab regimes that have encouraged Israeli-Palestinian peacemaking and weakened Hamas' rival, Palestinian President Mahmoud Abbas, who has ruled only the West Bank since Hamas violently seized control of Gaza in June 2007.
Abbas condemned the attacks, but fearing violence could spiral out of control, his forces also broke up protests in the West Bank. The offensive also risked opening new fronts, including unrest that could destabilize the West Bank and ignite possible rocket attacks by Lebanese Hezbollah guerrillas on northern Israel.
Britain, the EU, the Vatican, the U.N. secretary-general and special Mideast envoy Tony Blair all called for an immediate restoration of calm. The Arab League scheduled an emergency meeting Wednesday to discuss the situation.
But the U.S., Israel's closest ally, blamed Hamas. "These people are nothing but thugs, so Israel is going to defend its people against terrorists like Hamas that indiscriminately kill their own people," White House spokesman Gordon Johndroe said.
AP correspondent Aron Heller contributed to this report from Netivot, Israel. Amy Teibel reported from Jerusalem.