A rocket launched from Gaza at sundown on Sunday hit a house under construction in the battered Israeli border town of Sderot, slightly wounding a resident.
The attack came after the funerals of four Palestinian militants killed earlier in the day in an Israeli air-strike as they were firing mortars at Israel from the Gaza Strip.
The violence was the latest in a surge of spiraling clashes that have rocked a 5-month-old truce between Israel and Gaza's militant Hamas rulers.
However, both sides say they would like to preserve the truce, which is due to expire next month, but events over the past two weeks signal the opposite is happening.
Binyamin Netanyahu, opposition leader and head of Likud party said both sides should build peace through the political process from bottom up.
"I think that rather than build peace exclusively from the top down with political agreements, we have to add to the political process building peace from the bottom up by making the lives of our Palestinian neighbours a lot better so that they have a stake in peace and this is what has been missing."