At a cabinet meeting on Sunday morning, Mr Netanyahu, the Israeli prime minister, said: "The world needs to understand that Israel will not sit idly by in the face of attempts to attack us. We are prepared to intensify the response."
One unnamed senior Israeli government official, said: "A ground incursion is certainly not out of the question although we hope it won't come to that."
The Israeli Defence Forces (IDF) has confirmed that it is expecting, at the very least, instruction to intensify its campaign of air strikes on Hamas targets.
Commentators have pointed out similarities between this weekend's violence and the last incursion into Gaza in 2008, when Ehud Olmert was drawn into an operation three months before losing elections to Mr Netanyahu. Israel again goes to the polls next January.
This latest escalation in the intractable conflict between Israel and Islamic militants in the Gaza Strip began on Thursday when a booby-trapped tunnel dug by Palestinians underneath the border fence from Gaza into Israel exploded, injuring an Israeli soldier. The Israeli military believes Hamas had planned to use this tunnel for a kidnapping similar to that of Israeli soldier Gilad Shalit in 2006 or to launch a terror attack inside Israel.
In a separate incident on the same day, a 12 year-old Palestinian boy playing football was killed by fire from an Israeli tank, having been caught in an exchange of fire with Palestinian militants.
Comment: Best to take note of how this new round of violence began before it is all forgotten.
In an act of retribution, an anti-tank missile fired from the northern Gaza Strip blew up an IDF jeep patrolling the border fence. Four Israeli soldiers were injured in the blast.
Israel responded by targeting several militant munition stores and rocket launch sites, while a funeral tent outside Gaza City was also hit, killing four Palestinian civilians including two teenage boys.
Violent exchanges consistently erupt along the Israel-Gaza border every few months but usually abate within days. In recent weeks, however, Hamas has shifted its focused to Israeli targets inside Israeli territory.
"Sometimes it looks as if they are trying to shake the status quo, pushing us to check our response. Every time, they push a little further," a senior Israeli military official said
"Several Israeli soldiers have now been badly injured. I don't think the government or the Israeli people are prepared to accept this."
The Hamas leadership in Gaza, meanwhile, has issued a unified called to arms.
"The occupation's targeting of civilians was a grave escalation that must not pass in silence. Resistance must be reinforced in order to block [Israeli] aggression," said Fawzi Barhoum, the party's spokesman.
Separately, Israeli troops fire warning shots into Syria on Sunday in response to mortar fire, the first Israeli fire directed at the Syrian military in the Golan Heights area since the 1973 war.