Palestinians fired rockets from Gaza into Israel on Tuesday night, drawing retaliatory airstrikes and breaking a day-long lull in fighting between Israel and Hamas
At least two rockets launched from Gaza triggered sirens on the Israeli side of the border, the military said.
Earlier on Tuesday, a senior Israeli official said that despite the emerging lull, "the fighting may resume at any moment."
The official further stressed "there is no cease-fire agreement" and that Israel reserves the right to strike Hamas.
The next big test comes on Friday when Palestinians are expected to launch massive demonstrations on Gaza border fence to mark a year of weekly protests.
This week's fighting was triggered by a rocket on central Israel on Monday morning, which destroyed a home in central Israel and injured several people, resulting in a massive Israeli response several hours later.
Netanyahu, who cut short a visit to the United States to deal with the crisis after the first rocket attack on Monday, said Israel may take further action.
"We are prepared to do a lot more. We will do what is necessary to defend our people and to defend our state," Netanyahu said in a satellite address on Tuesday from Tel Aviv to the pro-Israel U.S. lobby group AIPAC in Washington.
Egypt was expected to pursue further truce talks on Wednesday, a Palestinian official involved in the efforts said.
The escalation was the biggest since November between Israel and Hamas, which fought three wars between 2008 and 2014 have come to the brink of all-out conflict several times since.
