In an interview on a privately-owned Israeli television station Sharon said: "We will take all steps against Islamic Jihad without any limitations. The response to terror acts will be strong and harsh."

Asked about a resumption of targeted killings against militants or leaders of Palestinian factions, Sharon said there was "no limit" on the orders handed down to the army.

Hamas threatened revenge against Israel for the air strikes, saying the attacks had opened the "gates to hell" and that the group was reconsidering a seven-month-old informal truce.

Israel launched a series of air raids against Hamas targets in Gaza before dawn, causing no casualties.

Hours later, one militant was killed in a helicopter strike on a mountain hideout near the Jewish settlement of Ariel in the occupied West Bank, Palestinian security sources said. They originally reported three Hamas men were killed but later said two of the men were either wounded or had escaped.

Within minutes, helicopters over Gaza launched a missile into a car, tearing it apart and killing four militants inside, hospital officials said. Hamas officials said the car was carrying a cache of makeshift Qassam rockets.

Saeb Erekat, a Palestinian negotiator, condemned the attack.

"It comes at a time when we are trying to maintain the rule of law and the (unity) of our authority and the only thing these Israeli escalations and attacks will lead to is to undermine our ability to do so," he said.

The Israeli air strikes were a sign that Israel had run out of patience with Abbas.

"We are taking these measures to stop these attacks as the Palestinian Authority refuses to do so," said a statement from Sharon's office.

The strikes followed the killing of a young Israeli woman in a rocket attack on Thursday that sparked the fiercest internal fighting in years between militants and Palestinian police, who confronted them trying to stop further salvoes.

Clashes erupted in Gaza City's Zeitoun area, after security forces searched for militants suspected of firing rockets.

Militants torched a police station, and set a police armored personnel carrier and three jeeps on fire. Black smoke from burning tires rose from the neighborhood, as masked Hamas gunmen stood guard outside the police station.

Two teenage boys, ages 17 and 13, were killed in the fighting. At least 25 people were wounded, including six policemen and 19 civilians, hospital officials said. It was not clear if Hamas gunmen were hurt.

After heavy exchanges of fire in the morning, police pulled out of Zeitoun while masked gunmen took up positions on street corners and rooftops.

The violence threatened to intensify. Israeli troops massed at two makeshift camps outside Gaza, and Defense Minister Shaul Mofaz told army commanders to plan for a ground operation in northern Gaza, though a raid would be delayed to give the Palestinians time to take action themselves.

PA President Mahmoud Abbas, struggling to salvage the truce and keep control in the face of a growing Hamas challenge, ordered police to act amid Israeli threats of harsh reprisals.

Palestinian security chief Nasser Youssef said that his forces will "not hesitate" to restore law and order, and ordered rocket attacks to be stopped by all means.

Defying Israel's occupation army and Palestinian police, Hamas kept up rocket volleys into southern Israel and mortar-fire on Gaza settlements, causing damage but no casualties.

Hamas' weapons-fire underscored their demands to share power in Gaza after Israel withdraws next month.

Sakher Bseisso, a Palestinian Cabinet minister involved in previous contacts with Hamas, said the militants were leaving Abbas, who was at his Gaza City office during the fighting, little choice but to crack down. "Hamas is trying to impose control on the ground," he said.

Palestinian officials and Hamas leaders exchanged recriminations over the internal strife but also began talks. The new violence called into question Abbas' policy of persuading the militants to voluntarily end attacks, and Israel and the United States were pressuring him to tackle the armed groups. The tough Palestinian police action in Gaza suggests Abbas might be responding.