Israeli air raids killed seven Islamic Jihad militants in the Gaza Strip on Saturday, prompting a massive barrage of retaliatory rocket fire, officials said.

Adham Abu Selmiya, spokesman for Gaza's emergency services, said five members of the Al-Quds Brigades, Islamic Jihad's armed wing, were killed and three critically wounded in a first Israeli attack.

As tit-for-tat fighting continued into the night, Israeli aircraft struck four more targets in Gaza, witnesses and Palestinian officials said, killing two militants and wounding two allegedly preparing to fire a missile near Rafah, in the south of the strip.

A strike east of Gaza City caused no casualties, but one of two raids in the area of Khan Yunis, in the south, left an Islamic Jihad militant lightly injured, witnesses said.

As rockets and mortar shells pounded Israel, police said they were raising their national alert level to its second-highest.

The Israeli military said the Rafah raid "targeted a terrorist squad in the southern Gaza strip responsible for the firing of military-use projectiles towards the Israeli home front."

It did not immediately comment on the other reported strikes.

Israeli media quoted hardline Foreign Minister Avigdor Lieberman, who is visiting Bosnia, as saying Israel was not looking for heightened conflict in the south but would not turn the other cheek.

"Israel is not seeking a confrontation with the Palestinians and does not want to escalate the current situation, but it will not tolerate barrage after barrage without retaliating," Haaretz newspaper's website quoted him as saying.

A spoksman for UN Middle East envoy Robert Serry, called for restraint.

"The recent escalations are very worrying. It's vital to de-escalate now, without any delay," spokesman Richard Miron said in a statement. "We strongly appeal for calm and an end to violence and bloodshed."

The military said of the earlier raid that the air force fired on a "group of terrorists preparing to fire long-range rockets" and that the attack had "prevented the attempted firing."

It said the men had also been responsible for firing a Grad rocket into Israel on Wednesday that hit near the city of Ashdod, 35 kilometres (22 miles) from the Gaza border.

The Al-Quds Brigades confirmed that five members, including a commander named as Ahmed al-Sheikh Khalil, were killed in the first strike, on a training camp, also near Rafah, where the second fatal raid took place.

The strikes were the bloodiest since a tacit ceasefire was agreed between Gaza Palestinian militants and Israel in late August.

Reprisal attacks began after sunset, and police said that by mid-evening 21 rockets had been fired from Gaza into southern Israel.

One slammed into a community centre and another into a block of flats, setting parked cars and gas canisters alight.

Rockets hit the city of Ashdod, the nearby town of Gan Yavneh and the city of Ashkelon, to the south, police said.

Spokeswoman Luba Samri told AFP that two people were moderately wounded and two others slightly injured.

Other rockets hit open ground elsewhere in southern Israel and one was fired "in the general direction" of the city of Beersheeva, in the Negev desert, but appeared to have stuck open ground, police said.

Israeli rescue services said a number of mortar rounds also hit areas near the frontier.

A statement from the Al-Quds Brigades claimed responsibility for the fire and posted a video on its website it said showed the launching of five of the the rockets.

Spokesman Abu Ahmed accused Israel of carrying out the raid in order to heighten tensions so it could renege on freeing 550 Palestinian prisoners agreed as part of a prisoner-swap deal with Gaza rulers Hamas for the liberation of Israeli soldier Gilad Shalit.

Israel released 477 prisoners in exchange for Shalit earlier this month and is due to free another 550 within two months.

A spokesman for Hamas's Ezzedine al-Qassam Brigades said other militant groups were mulling their response.

"The occupation is completely responsible for the crime in Rafah and all of the resistance factions cannot leave the shedding of our martyrs' blood unanswered," spokesman Abu Obeida said. "We shall discuss the answer to this crime."

The Israeli air force carried out three raids on the Gaza Strip Thursday in retaliation for that attack, witnesses said.

Those raids targeted areas east and west of Khan Yunis in the south of the Strip, and a base of the Ezzedine al-Qassam Brigades was hit, they said.

An Israeli army spokesman said of those strikes that aircraft had "attacked three terrorist sites in the Gaza Strip as well as an arms factory in the south of the territory."