Israel said it had targeted Islamic Jihad militant sites as well as rocket-launching squads.
The rocket fire into Israel caused damage and a number of injuries, with at least one rocket hitting a house and another narrowly missing passing cars on a highway.
A factory in the city of Sderot was also hit, sparking a fire.
Israeli medics said they had treated 46 people, 21 of whom had "stress symptoms" related to the rocket fire.
Reports that a separate strike targeted an Islamic Jihad member in Damascus added to the day's tensions.
Islamic Jihad confirmed one of its officials, Akram Ajouri, was targeted in the Syrian capital, with Syrian state news agency SANA reporting an Israeli strike had hit Ajouri's home, "killing his son Muadh and another person".
Israel did not comment on that strike.
The initial Israeli raid in Gaza early Tuesday, thought to have been carried out by a drone, killed Islamic Jihad commander Baha Abu Al-Ata, 41.
Islamic Jihad confirmed his death, along with that of his wife.
Israel blamed Ata for recent rocket fire into its territory and said he had been preparing further attacks.
As the retaliatory rocket fire followed, air raid sirens rang out in various parts of Israel as residents took cover in bomb shelters.
Israel's military said Tuesday night that some 190 rockets had been fired at its territory throughout the day, with dozens intercepted by air defences.
More than half of the rockets fell in open areas, it said.
Footage posted online showing the rocket that hit the highway near the central Israeli city of Gan Yavne, narrowly missing cars.
Islamic Jihad, allied to Hamas, the Islamist movement that rules Gaza, claimed responsibility for rocket fire from the Strip.
Schools were closed in both the Gaza Strip and in parts of Israel, including in the commercial capital Tel Aviv.
The Israeli army ordered "non-essential" workers in Tel Aviv, central Israel and the Gaza border region to stay home, banning public gatherings.
Prime Minister Benjamin Netanyahu charged that Ata had over the past year "planned and executed many attacks" and "fired hundreds of rockets at communities adjoining Gaza".
"Israel is not interested in escalation, but we shall do everything necessary in order to defend ourselves," he said in a televised statement from defence headquarters.
"I'm telling you in advance, it could take time."
Nadav Argaman, head of domestic security agency Shin Bet, said the operation "allowed us to reach the level of the bed in which he slept, the small room in which he lived, in which he hid."
Damage from a blast could be seen at Ata's home in the Shejayia district of eastern Gaza City.
Mosque loudspeakers rang out with news of Ata's death early Tuesday and crowds joined his funeral procession through the streets of the city, occasionally firing guns into the air.
The flare-up comes at a politically sensitive time for Israel.
A 17 September general election ended in a deadlock and a new government is yet to be formed.
It was the second election since April, when polls also ended inconclusively.