Palestine, GAZA (BBN)-Israel says its jets have hit two targets in the Gaza Strip.
The targets were "Hamas weapon manufacturing facilities", the Israeli military said, adding the strikes were in response to two rockets fired from Gaza into southern Israel, reports BBC.
A woman and her young daughter in a nearby house were killed during the air raid, Palestinian officials said.
Earlier, US Secretary of State John Kerry expressed "deep concern" over the situation.
He made separate phone calls to Israeli PM Benjamin Netanyahu and Palestinian Authority President Mahmoud Abbas.
There have been weeks of tension over access to a site in East Jerusalem sacred to both Jews and Muslims.
Can Israel and the Palestinians contain spiralling violence?
Palestinians fear Israel plans to change arrangements at the al-Aqsa mosque/Temple Mount compound, where Jews are allowed to visit but not allowed to pray - something Israel insists it will continue.
"The IDF holds Hamas responsible for any act of aggression from the Gaza Strip," said Israel Defense Forces' spokesman Lt Col Peter Lerner in a statement following the air strikes early on Sunday.
As well as the two reported deaths, medical staff in the Zeitun sector south of Gaza City say three people are trapped in the rubble of the destroyed house.
In his phone calls earlier Kerry "stressed the importance of upholding the status quo in word and deed" at the site, the State Department said.
He offered his support in efforts to restore calm, but both men blamed the other side for the rising violence.
Netanyahu "made it clear that he expects the PA (Palestinian Authority) to stop its wild and mendacious incitement, which is causing the current wave of terrorism," his Twitter account said.
Abbas told Kerry that Israel should stop settler "provocations", which he said were carried out under Israeli army protection, his office said.
In other developments on Saturday:
Netanyahu ordered the mobilisation of hundreds of police reservists to restore security
Israeli police shot dead two Palestinian youths during clashes close to the border with the Gaza Strip
Two Palestinians carried out stabbing attacks in Jerusalem before being shot dead
Violent protests broke out after the funeral of a Palestinian man who had been shot during unrest at the Shuafat refugee camp in East Jerusalem and later died of his injuries
The violence has spurred talk from Hamas, which dominates Gaza, of a new Palestinian intifada, or uprising.
But the clashes have not yet reached the scale of previous intifadas, with no clear mass movement or leadership so far emerging.
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