Militants in Palestine opposed to any deal between Israel and Hamas are believed to be behind the missile launches.
"We have just started striking terror sites in Gaza", the IDF posted on Twitter minutes after the air strikes began.
It wasn't immediately clear which group in Gaza was responsible for the surprise rocket fire, which occurred on the eve of weekly Hamas-spurred Friday mass rallies and riots along the Strip's border.
This is a breaking news story and is constantly being updated.
The attacks were taking place in the southern Gaza town of Khan Younis, about 15 miles south of Gaza City.
There were no immediate reports of any casualties or damage. The Iran-backed Al-Sabareen terrorist group in Gaza has yet to release an official statement following the rocket attacks.
The rocket attack Thursday night caught the Israeli military off guard and marked the first time that Tel Aviv, some 80 kilometres north of Gaza, has been targeted since a 2014 war. Palestinian media said naval bases belonging to the ruling Hamas group had been struck.
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At the time, Netanyahu issued a warning to Hamas, rejecting suggestions that Israel would be reluctant to take tough action in Gaza ahead of national elections next month.
CBS News has confirmed Israeli Prime Minister Benjamin Netanyahu, who is also Israel's defense minister, is holding an urgent security meeting with his military chief and other senior advisers in wake of the rocket launches.
The Israeli strikes on the Hamas-run Strip came after rocket fire from Gaza at Tel Aviv.
The Home Front Command did not give any special instructions to Israelis and said they could continue to carry on as normal.
Tel Aviv Mayor Ron Huldai said he had ordered the city to open public air raid shelters as a protective measure.
Political observers raised concerns that the rockets fired from Gaza may be used as a pretext for Israel to launch a military assault on the besieged Palestinian territory. Late Thursday, local media said that Egyptian mediators left the territory.
Palestinian Islamic Jihad, another Gaza faction, also denied being involved in the incident, Reuters reported.
"I'd suggest to Hamas - don't count on it".