The Palestinian armed group Hamas has launched an attack against Israel.
The attack code-named "Operation Al-Aqsa Flood", is the most serious escalation since Israel and Hamas fought an 11-day war in 2021.
Hamas said it had fired 5,000 rockets, while Israel confirmed that the group's fighters had entered its territory.
The first round of rockets was fired at 06:30am local time (03:30 GMT).
The Israeli army said it launched "Operation Iron Swords" against the Hamas group in the Gaza Strip.
The early-morning strikes occurred on Simchat Torah, a holiday which falls towards the conclusion of the weeklong Jewish festival known as Sukkot, or the Feast of Tabernacles.
The rockets were fired as far north as Tel Aviv. Hamas also sent fighters into southern Israel.
Israeli media said that gunmen had opened fire on passers-by in the town of Sderot, and footage circulating on social media appeared to show clashes in city streets as well as gunmen in jeeps roaming the countryside.
Israel's army said it was fighting Gaza militants who entered Israel by land, sea and air using paragliders on Saturday, after a barrage of rockets was fired at Israel from the Palestinian enclave.
"It was a combined ground raid which happened through paragliders, through the sea and through the ground," army spokesman Richard Hecht told reporters.
"Right now we're fighting. We're fighting in certain locations around the Gaza Strip... our forces are now fighting on the ground" in Israel, he added.
Hecht confirmed there are casualties but would not be drawn on details, nor discuss reports that multiple Israelis had been captured by Palestinian militants.
Thousands of military reservists are set to be drawn up for Gaza, as well as northern Israel, near foes Lebanon and Syria, and the occupied West Bank.
"We're looking at all arenas... we understand this is something big," Hecht said.
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