The Israeli Parliament has given preliminary authorisation for the mobilisation of military reserves if required to press an air assault against the Hamas-ruled Gaza Strip.
Ministers convened in Jerusalem agreed "to allow the IDF (Israel Defence Forces) to enlist reserve forces in accordance with the need and the authorisation of the defence minister," a statement from Prime Minister Benjamin Netanyahu's office said.
Israeli President Shimon Peres briefed US President Barack Obama about Israel's killing of the Hamas military commander in Gaza, saying the man was a "mass-murderer", Peres's office said in a statement.
Islamist Hamas said Ahmed Al-Jaabari, who ran the organisation's armed wing, Izz el-Deen Al-Qassam, died along with a passenger after their car was targeted by an Israeli missile.
Mr Peres, a Nobel Peace Prize laureate and former Israeli prime minister, told Mr Obama that the killing of Mr al-Jaabari was Israel's response to a surge in cross-border Palestinian rocket and mortar salvoes from Gaza.
"Israel is not interested in stoking the flames, but for the past five days there has been constant missile fire at Israel and mothers and children cannot sleep quietly at night," Mr Peres was quoted as saying. "There is a limit to what Israel can absorb."
Immediate calls for revenge were broadcast over Hamas radio and smaller groups also warned of retaliation.
"Israel has declared war on Gaza and they will bear the responsibility for the consequences," Islamic Jihad said.
The Obama administration responded to the flareup by strongly condemning Hamas, an Islamist group shunned by the West as an obstacle to peace.
"There is no justification for the violence that Hamas and other terrorist organizations are employing against the people of Israel," said Mark Toner, deputy US State Department spokesman.
Israel's air strikes killed 10 people, including Mr Jaabari and at least five civilians, on Wednesday, Palestinian doctor said.
The escalation in Gaza came in a week when Israel pounded Syrian artillery positions it said had fired into the Israeli-annexed Golan Heights amid a civil war in Syria that has brought renewed instability to neighbouring Lebanon.
Hamas has been supported by both Syria and Iran, which Israel regards as a rising threat to its own existence due to its nuclear programme.
Israel holds a general election on 22 January and conservative Prime Minister Benjamin Netanyahu has come under pressure to respond firmly against Hamas, with residents of southern Israel complaining bitterly about repeated missile strikes.