Palestinian militants say they fired 130 missiles at the Israeli city of Tel Aviv after an Israeli air strike felled a tower block in the Gaza Strip.
The 13-storey building was attacked an hour and a half after residents and local people were warned to evacuate, Reuters news agency reports.
Israel’s military says it is targeting militants in Gaza in response to earlier rocket attacks.
At least 31 people have died in some of the worst violence in years.
The international community has urged both sides to end the escalation, which follows days of unrest in Jerusalem.
Militants had already fired hundreds of rockets towards Jerusalem and other areas.
Three people have been killed in Israeli areas while at least 28 Palestinians have been killed by Israeli air strikes.
Israeli Prime Minister Benjamin Netanyahu said earlier that the main militant group, Hamas, had “crossed a red line” by firing rockets towards Jerusalem for the first time in years.
Hamas, which controls Gaza, says it has been acting to defend Jerusalem’s al-Aqsa mosque from Israeli “aggression and terrorism” after the site, which is holy to Muslims and Jews, saw clashes between Israeli police and Palestinians on Monday that left hundreds injured.
The past few days have seen the worst violence in Jerusalem since 2017. It followed mounting Palestinian anger over the threatened eviction of families from their homes in occupied East Jerusalem by Jewish settlers. Tension had already been stoked by a month of altercations between protesters and police in the predominantly Arab part of the city.
What do we know of the latest fighting?
Hamas said it had launched rockets at Tel Aviv and its suburbs in response to “the enemy’s targeting of residential towers”.
Video footage from the city shows rockets streaking through the night sky, some exploding as they are hit by Israeli interceptor missiles.
A 50-year-old woman was killed by a rocket in Rishon LeZion, near Tel Aviv, Israeli official said.
In the Tel Aviv suburb of Holon, a rocket hit an empty bus, Israeli police spokesman Mickey Rosenfeld told AFP news agency. A girl of five and two women, one 50 and one 30, were injured in the town.
In Tel Aviv itself, pedestrians ran for shelter and diners streamed out of restaurants while others flattened themselves on pavements as the sirens sounded, according to Reuters.
Ben Gurion Airport briefly halted flights and an energy pipeline between the cities of Eilat and Ashkelon was hit.
The rockets were launched after the destruction of the Hanadi Tower in Gaza, which houses an office used by the political leadership of Hamas.
Hours after the collapse, there were still no reports of casualties.
There are reports that a second high-rise building was also destroyed by the Israelis after a warning to evacuate.
Israeli Defence Minister Benny Gantz said the Israeli strikes were “just the beginning”.
“Terror organisations have been hit hard and will continue to be hit because of their decision to hit Israel,” he said. “We’ll return peace and quiet, for the long term.”
Hamas leader Ismail Haniyeh said the group was “ready” if Israel chose to escalate.
“If [Israel] wants to escalate, we are ready for it, and if it wants to stop, we’re also ready,” he said in a televised address. “There is a new balance of force.”
The UN Security Council will meet privately on Wednesday to discuss the conflict, diplomats said.