Israeli warplanes are bombing Gaza Strip for a second successive day and the territory's emergency services say 271 Palestinians have been killed so far, while another 620 have been wounded.
The operation is called "Solid Lead". Israel says it targeted "terrorist infrastructure" and outgoing Prime Minister Ehud Olmert said it "may take time".
Officials said Hamas leaders could be targeted.
Hamas has vowed revenge including suicide bomb attacks in the "cafes and streets" of Israel.
Israel said the strikes were in response to almost daily rocket attacks from Gaza, which intensified after Hamas ended a six-month ceasefire on 19 December.
Israel said its warplanes mounted about 100 strikes on Saturday and that Palestinian militants had fired some 70 rockets at the Jewish state, killing one Israeli man.
Defence Minister Ehud Barak has ruled out any new truce with Hamas.
He said operations would continue on the ground if air strikes were not enough to change Hamas's behaviour.
Staff at the main hospital in Gaza said operating rooms were overflowing, it was running out of medicine, and there were not enough surgeons to cope.
Foreign minister Tzipi Livni warned earlier this week that Israel would retaliate if Hamas continued firing rockets as it had been doing.
A five-day offensive in March killed more than 120 people, but Saturday's death toll is reported to be the highest since 1948, when Israel was established.
Hamas has called on Al-Jazeera television for a new intifada (uprising). The first Palestinian intifada began in 1987 and a second in 2000 after peace talks failed.
Israel is due to hold an election on 10 February.
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The UN Security Council called for an immediate halt to all violence in Gaza.
"The members of the Security Council expressed serious concern at the escalation of the situation in Gaza and called for an immediate halt to all violence," said the statement, read to reporters by Croatian Ambassador Neven Jurica, president of the council.
Earlier, UN Secretary General Ban Ki Moon condemned what he said is an excessive use of force leading to deaths and injuries of civilians.
Arab countries have unanimously condemned the Israeli attacks on Gaza.
The Arab League has delayed until Wednesday an emergency meeting of Arab foreign ministers to discuss the crisis.
New Zealand Foreign Affairs Minister Murray McCully describes the attacks as "a day of tragedy".
Mr McCully says it is pointless to fingerpoint about who is responsible, or debate what is proportionate versus disproportionate response.
He has endorsed a call by the United Nations for an immediate ceasefire and says that could provide the breathing space that's needed to broker a solution.
Palestinian President Mahmoud Abbas said the Israeli air campaign was "criminal" and urged world powers to intervene.
A moderate Palestinian politician Dr Hanan Ashrawi has described the bombings as a massacre.
Egypt said it would keep trying to restore the truce.
The United States has called for Israel to do all it can to protect innocent people, but says Hamas is responsible for renewing violence in the region.
The European Union has called for an immediate ceasefire.
