The dead and wounded lay scattered on the ground following the Israeli attacks, which destroyed several Hamas police compounds in the bloodiest day for Palestinians in more than 20 years. Distraught rescuers cried out as they tried to find those still alive and black smoke billowed over Gaza city.
The Israeli military said it had targeted "terrorist infrastructure" and pledged more strikes if necessary, possibly targeting leaders of the Hamas Islamist militant group.
Hamas threatened to unleash "hell" to avenge the dead, including possible suicide bombings, and militants fired rockets into southern Israel soon after the Israeli strikes. Medics said one Israeli was killed and two were moderately wounded.
Palestinian President Mahmoud Abbas condemned as "criminal" the Israeli air campaign and called for the international community to intervene.
Hospital officials in Gaza City said more than 120 people had been killed there, including 40 at a police headquarters where Hamas was hosting a graduation ceremony for new recruits. Among those killed was police chief Tawfiq Jabber.
Another 23 Palestinians were killed in air strikes in Khan Younis and Rafah in the southern Gaza Strip, medical officials said. At one site, there was a huge crater in the ground.
Uniformed bodies lay in a pile and the wounded writhed in pain, Reuters television pictures showed. Rescuers carried those showing signs of life to cars and ambulances, while others tried to revive the unconscious.
An Israeli army spokesman said the air force had conducted "a massive operation" against "terrorist infrastructure" following the collapse of a six-month-old, Egyptian-brokered ceasefire just over a week ago.
Gaza militants have fired dozens of makeshift rockets at southern Israel in recent days. The rockets cause damage but few injuries.
Hamas armed wing spokesman Abu Ubaida threatened to unleash "hell" on Israel, saying the Islamist group would "teach the enemy a lesson they will never forget." Hamas said it was considering a new suicide bombing campaign.
An aide to Israeli Defence Minister Ehud Barak said Israel was prepared to step up its assault "as required".
Several of the rescuers beat their heads and shouted: "Allahu akbar (God is greatest)." One badly wounded prostrate man was quietly reciting verses from the Koran.
A five-day Israeli offensive in March killed more than 120 people, but today's death toll would be the highest for Palestinians since their 1980s uprising.
Witnesses said the attacks were carried out by warplanes and combat helicopters.
Witnesses also reported seeing Israeli planes bombing sites along Gaza's border with Egypt. Palestinians use hundreds of tunnels under the border to bring in everything from goods to weapons, making them prime Israeli targets.
The air strikes followed a decision by Israeli Prime Minister Edud Olmert's security cabinet to widen reprisals for cross-border Palestinian rocket attacks on Israel. Olmert had warned Hamas, which seized control of the coastal enclave in June 2007, to stop firing rockets or pay a heavy price.
"I will not hesitate to use Israel's might to strike Hamas and (Islamic) Jihad," he told Al Arabiya television, an Arab broadcaster widely watched in Gaza.
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