Palestinian militants Hamas said on Wednesday that they had fired more than 200 rockets into Israel, in retaliation for strikes on a tower block in the Israeli-blockaded enclave of Gaza, which they control.
The armed branch of Hamas said in a statement that it was "in the process of firing 110 rockets towards the city of Tel Aviv" and 100 rockets towards the town of Beersheva "as reprisal for the restarting of strikes against civilian homes".
Sirens warning of incoming rocket fire blared in Tel Aviv early on Wednesday, amid the heaviest fighting between Israel and Palestinian militants in Gaza in years.
The sounds of several explosions were heard.
Five Israelis, including three women and a child, were killed by rocket fire on Tuesday and early Wednesday, and dozens of people were wounded.
The death toll in Gaza rose to 35 Palestinians, including 10 children, according to the Health Ministry. More than 200 people were wounded.
In the West Bank, a 26-year-old Palestinian was killed during clashes with Israeli troops that entered al-Fawar refugee camp in southern Hebron, the ministry said.
Israeli Prime Minister Benjamin Netanyahu on Wednesday declared a state of emergency in the central city of Lod as police accused Arab residents of waging "wide-scale riots".
Mr Netanyahu's statement came after an Israeli Arab was killed in Lod on Tuesday night as violence soars between Israel and the Palestinian territories.
Mr Netanyahu went to the city, which is in the suburbs of economic hub Tel Aviv near the Ben Gurion airport, to call for calm.
The city of 77,000 people, including 47,000 Jewish Israelis and 23,000 Arab Israelis, had been the scene of violent clashes on Monday, local police said.
On Tuesday evening, as protests multiplied across East Jerusalem, the occupied West Bank and also Israeli Arab cities, the situation degenerated in Lod.
"Wide-scale riots erupted by some of the Arab residents and endangering communities," police said.
"Vehicles were burnt and damage caused to property."
The government said reinforcements had been deployed after Israeli media reported that three synagogues and several businesses were set on fire in Lod.
"Sixteen border police platoons (have been) mobilised in areas in order to deal with the violence," police said.
There were also violent scenes in Israeli Arab areas including Acre, Wadi Ara and Jisr A-Zarqa, where eight people were arrested.
On Tuesday, the Israeli military struck a building in Gaza targeting senior Hamas officials, though Hamas claimed it was a residential complex.
Monday night's assault on the coastal city came as Mr Netanyahu vowed to "intensify" airstrikes in the Gaza Strip after dozens of Hamas rockets pummelled Israeli towns across the border, killing two Israeli women.
Heiko Maas, the German foreign minister, said the rocket attacks on Israel were "absolutely unacceptable".
"Israel has in this situation the right to self-defence. This escalation of violence can be neither tolerated nor accepted," he said.
A spokesperson for the US State Department said: "Israel does have the right to defend itself. At the same time reports of civilian deaths are something that we regret and would like to come to a stop."
Hamas appeared to be focusing most of its firepower on Ashkelon on Tuesday, in an apparent attempt to overwhelm Israel's Iron Dome defence system. The Islamist group claimed it had fired a total of 137 rockets within just five minutes during the barrage of Ashkelon.
"First I heard distant explosions and then I heard one that was so strong I knew it was very close," said 50-year-old Igor Tsvitkoviz as explosions continued to echo around the city.
In nearby Ashdod, smoke billowed from the roof of an Israeli family's house that suffered a direct rocket hit. The house was empty at the time and no one was injured, but a relative, Rachel Sharbit, said the family's children were sobbing uncontrollably each time they heard an air raid siren.
Asked how the Israeli government should respond to the ongoing assault, she said: "We must use force to make sure this will stop, it's impossible to continue our lives like this."
Two Israelis were killed during the rocket barrage: an elderly woman and her caregiver. Israeli media reports said they had not managed to reach a bomb shelter in time.
In Gaza, survivors of Israeli airstrikes spoke of their terror as glass shattered window panes and the force of the explosions sent rocks and wall chunks hurtling through the air.
Rami Alghoul, the owner of an electronics shop in Gaza, was having dinner when he heard "very big and violent explosions", prompting him to run downstairs where he found scenes of chaos.
"We were shocked and scared. We saw fumes and fires, glass breaking everywhere, walls smashed... we saw people covered in blood being transported to hospitals," he told The Telegraph.
"We demand that the international community pressures Israel to stop attacking civilians.
"People were sleeping, people were unarmed, and some were praying."
Israel says it takes extreme care to avoid civilian casualties, while military officials suggested on Tuesday that some civilian deaths may have been caused by Hamas rockets that misfired and exploded in Gazan territory.
On Monday night it was reported that Egypt and Qatar, which have mediated past Israeli-Hamas conflicts, were attempting to calm tensions.
However, Egypt's Foreign Minister Sameh Shoukry told an Arab League meeting that, although Cairo had "extensively reached out" to Israel and other concerned countries, "we did not get the necessary response".
As Israeli civilians in the town of Ashkelon retreated to bomb shelters on Tuesday afternoon, Gazan parents faced their own harrowing ordeal as they held funeral processions for nine children who lost their lives, reportedly to an Israeli airstrike.
Among the victims in Gaza was 11-year-old Hussein Hamad, whose body, wrapped in a yellow and white shroud, was carried by mourners through Beit Hanoun on Tuesday.
In response to reports that Israel's operation had killed civilians, an Israeli military spokesman said that this "cannot be ruled out" because the firing pits were embedded in the civilian population.
"We are in the midst of a campaign,” Mr Netanyau said on Tuesday.
“Since yesterday afternoon, the Israel Defence Forces has carried out hundreds of strikes against Hamas and Islamic Jihad in Gaza. We’ve hit commanders and many high-quality targets.”
Mr Netanyahu said Hamas would "pay a heavy price" and the operation "will take time".
Benny Gantz, the defence minister, added that buildings in Gaza would "continue to crumble". He was referring to Operation Guardians of the Wall, a major Israeli military offensive which has already killed at least 31 people in Gaza, according to Palestinian reports, and injured dozens of others.
The Israeli strikes were in retaliation for a Hamas rocket attack on Jerusalem on Monday, which in turn was a response to hundreds of Palestinians being injured by Israeli police in clashes earlier this week.
The Telegraph spoke to several shaken Israelis in Ashkelon who had retreated to underground bomb shelters and safe rooms as their neighbourhoods were hammered by Hamas rockets earlier that day.