Gaza-based militants fired first after the temporary truce expired at 8 am (local time), launching rockets towards Israel and marking the resumption of the devastating month-long conflict.
The violence ended the three-day lull in fighting between Israel and Hamas that has killed at least 1,898 Palestinians and 67 people in Israel, almost all soldiers, since July 8.
Five Palestinians were killed including a 10-year-old boy, and at least 31 others wounded in Israeli air strikes, said Ashraf al-Qudra, Gaza's emergency services spokesman.
The IDF said 40 rockets were fired at Israel today. The military said its Iron Dome missile shield had intercepted three rockets, while the remaining ones fell on open ground.
"The Israeli prime minister and defence minister have ordered the IDF (Israel Defence Forces) to retaliate forcefully to the Hamas breach of the ceasefire," an official said in a statement.
Thousands of Palestinians who had returned to their houses again took refuge at UN shelters.
IDF retaliated strongly to rocket fire by Gaza militants calling the unprovoked attacks "unacceptable, intolerable and short-sighted".
Israeli jets struck multiple targets across the Gaza Strip, following the barrage of rocket attacks in which two people, including a soldier, were injured.
A ten-year old Palestinian boy was killed and five others injured in an Israeli air strike on a mosque in the Sheikh al-Radwan neighbourhood of Gaza City. Six other Palestinians were injured across Gaza.
Fire from Israeli tanks and gunboats was also reported from northern and central Gaza.
Meanwhile, Israel pulled out of talks in Cairo, officials and medics said.
"Israel will not negotiate under fire," an official said.
Hamas said Israel had failed to meet its key demands, including the lifting of the blockade of Gaza, the release of prisoners and the end of the Israeli offensive.
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