At least 40 people have been killed in Israel after a major surprise attack with militants crossing into Israel from Gaza during heavy rocket fire.
Several Israelis have reportedly been taken back to Gaza as hostages.
Israel has responded with a wave of air strikes on targets in Gaza killing 161 people, Palestinian officials say.
Israeli Prime Minister Benjamin Netanyahu said Israel is “at war” and vowed that Hamas, Gaza’s rulers, will “pay a price it has never known”.
“This morning Hamas launched a murderous surprise attack against the state of Israel and its citizens,” he said in a video address.
This is one of the most serious escalations in the Israel-Palestinian conflict in years.
The attack by Palestinian militant group Hamas saw fighters cross the perimeter fence just after dawn. At the same time, barrages of rockets were launched from Gaza – some reaching as far as Tel Aviv and Jerusalem.
How the gunmen managed to penetrate one of the most heavily fortified borders in the world is unclear.
The Israeli military has said that dozens of fighter jets are carrying out air strikes on Hamas sites in Gaza, and it has hit 17 Hamas military compounds. It also said it has mobilised tens of thousands of reservists.
The Palestinian health ministry says 161 people have been killed in Israeli strikes.
The rocket barrages from Gaza – the biggest attack by Hamas on Israel in years – began just after dawn on Saturday, the Jewish Sabbath and the day of the festival of Simchat Torah.
As sirens sounded across Israel, the IDF announced that “terrorists” had infiltrated Israeli territory “in a number of different locations”.
It told civilians in southern and central areas to stay next to shelters, and inside shelters in the area surrounding Gaza.
Footage posted online appeared to show a group of heavily armed Palestinian militants dressed in black fatigues driving around Sderot in a pick-up truck.
In one video, the same militants seemed to be exchanging fire with Israeli forces on the streets of the town, which is only 1.6km (1 mile) from Gaza.
There are also unconfirmed reports in the Palestinian media that a number of Israelis have been taken hostage by militants.
On its social media channels, Hamas released videos apparently showing Israelis captured by its fighters. In some videos, which can’t be verified, civilians appear to have been taken as hostages to the Palestinian territory – an unprecedented development.
Footage is also circulating of Palestinians in Gaza driving Israeli military vehicles.
Some 545 Israelis have been wounded in the Hamas attacks, Israel’s health ministry says.
For hours, Israeli television channels have carried live interviews with people trapped in their homes during chaotic scenes after Palestinian militants entered their towns and villages.
Residents say they do not remember a situation like this for a long time, while streets in the capital Tel Aviv have been locked down and the streets are empty.
“Restaurants, cafes, everything is locked down and there is a heavy feeling of surprise, of shock and of fear from what is still expected to happen,” English author and journalist Gideon Levy told the BBC.
“When the first rockets fell, I was still jogging in the park, the noise was terrible.”
The leader of one regional council in southern Israel, Ofir Liebstein, was killed in an exchange of fire with militants when he went to defend his community.
The rocket barrages meanwhile continued throughout Saturday morning, with thousands of projectiles launched towards Israel. Hospitals in the southern city of Ashkelon and central city of Beer Sheva are treating casualties.
“Citizens of Israel, we are at war, not in an operation or in rounds, but at war,” Prime Minister Netanyahu said in a statement.
“I convened the heads of the security establishment and ordered – first of all – to clear out the communities that have been infiltrated by terrorists. This currently is being carried out.
“At the same time, I have ordered an extensive mobilization of reserves and that we return fire of a magnitude that the enemy has not known.”
The rocket barrages meanwhile continued throughout Saturday morning, with thousands of projectiles launched towards Israel. Hospitals in the southern city of Ashkelon and central city of Beer Sheva are treating casualties.
“Citizens of Israel, we are at war, not in an operation or in rounds, but at war,” Prime Minister Netanyahu said in a statement.
“I convened the heads of the security establishment and ordered – first of all – to clear out the communities that have been infiltrated by terrorists. This currently is being carried out.
“At the same time, I have ordered an extensive mobilization of reserves and that we return fire of a magnitude that the enemy has not known.”
