At least 14 people are reported to have been killed in three attacks in southern Israel close to the Egyptian border.
The attacks appear to have been coordinated and targeted a passenger bus, a private car and a group of soldiers.
Media reports said seven Israelis and seven gunmen were killed in the three attacks. The government has not confirmed those figures.
In the bus attack, gunmen opened fire on a bus carrying civilians to the Red Sea resort of Eilat, injuring at least 10 people. Security services then chased the assailants before opening fire on them.
Israel said the attackers were from Hamas-run Gaza. Its intelligence services said they had entered the country by crossing the border with Egypt.
Israeli Prime Minister Benjamin Netanyahu warned those who attack Israel will “pay a very heavy price”.
Hamas has rejected suggestions that it was behind the killings.
Special forces have been called in to patrol the border and roads around Eilat have been closed.
Palestinian medics quoted by the AFP news agency said that Israel had launched air strikes on Gaza earlier on Thursday that left at least six people dead.