Israel said it will close its only crossing from Gaza for workers tomorrow in response to overnight rocket fire, stopping short of conducting retaliatory strikes in an apparent bid to ease tensions.
The rocket attacks followed days of clashes at Jerusalem's flashpoint Al-Aqsa mosque compound and a month of deadly violence.
The unrest - which comes as the Jewish festival of Passover overlaps with the holy Muslim fasting month of Ramadan - has sparked international fears of conflict, one year after similar violence led to an 11-day war between Israel and Gaza-based militants.
Two rockets were fired from Gaza at southern Israel last night, one of them hitting Israel and the other falling short and striking near a residential building in northern Gaza, Palestinian and Israeli sources said.
A third rocket was fired at Israel this morning, the army said, with no air raid sirens activated for any of the launches.
They followed rocket attacks on Wednesday and Thursday, and came as Israeli police clashed with Palestinian protesters at Al-Aqsa mosque, leaving at least one man hospitalised in serious condition.
Israel had retaliated against those attacks with air strikes, but in an apparent desire to prevent further violence, shifted its response this time to the painful economic measure of closing Erez, implying that further rockets would extend the penalty.
"The re-opening of the crossing will be decided in accordance with a security situational assessment," COGAT, a unit of the Israeli defence ministry responsible for Palestinian civil affairs, said.
More than 200 people, mostly Palestinians, have been hurt in clashes in and around Al-Aqsa in the past week.
Palestinians have been outraged by massive Israeli police deployment and repeated visits by Jews to the holy site.
Early yesterday, the Palestinian Red Crescent said 57 people were wounded after police stormed the compound in Israeli-annexed east Jerusalem's Old City when Palestinians began hurling stones towards the Western Wall, the holiest site where Jews can pray.
And after midday prayers, some Muslim worshippers chanted "incitement" and tried to damage a police post, police said, using a drone to spray tear gas from the air, AFP reporters said.
Al-Aqsa is Islam's third-holiest site, and the most sacred site in Judaism where it is known as the Temple Mount.
By long-standing convention, Jews are allowed to visit under certain conditions but are not allowed to pray there.
The escalating unrest prompted concern at the United Nations, which on Thursday demanded a probe into the Israeli police actions.
"The use of force by Israeli police resulting in widespread injuries among worshippers and staff in and around the Al-Aqsa mosque compound must be promptly, impartially, independently and transparently investigated," said Ravina Shamdasani, spokeswoman for the UN Office of the High Commissioner for Human Rights.