More than 200 Israelis died in a surprise large-scale attack by the Palestinian militant group Hamas on Saturday, the army said, as Prime Minister Benjamin Netanyahu vowed to reduce the group's Gaza hideouts to "rubble".

Intense air strikes on the coastal enclave brought the Palestinian death toll to at least 232, Gaza officials said, following Hamas's massive rocket barrage and ground, air and sea offensive, in the conflict's bloodiest escalation in decades.

Gun battles raged into the night between Israeli forces and hundreds of Hamas fighters in at least 22 Israel locations, including at least two where gunmen were holding hostages, the army said.

"Terrorists rampaged and broke into homes, massacring civilians," the army said, adding that more than 1,000 people in Israel were wounded by gunshots or the more than 3,000 incoming rockets.

"We are at war," Netanyahu told the stunned nation in the morning after Hamas had launched its multipronged attack at dawn, half a century after the outbreak of the 1973 Arab-Israeli war.

"I'm telling the people of Gaza: get out of there now because we're about to act everywhere with all our force," the premier said later. "We'll strike them to the bitter end and avenge with force this black day they brought on Israel and its people."

He warned that "all the places in which Hamas is based, in this city of evil, all the places Hamas is hiding in, acting from — we'll turn them into rubble."

"What happened today is unprecedented in Israel and I will see to it that it does not happen again."

As the UN Security Council called an emergency meeting for Sunday, President Joe Biden voiced "rock solid and unwavering" support for the US ally and warned "against any other party hostile to Israel seeking advantage in this situation".

'So many bodies'

Secretary of State Antony Blinken also spoke to Egypt, a key intermediary between Israel and Hamas about the "urgency in achieving an immediate halt" to the fighting, State Department spokesman Matthew Miller said.

As night fell, the Israeli army said its forces were still engaged in live gun battles in a string of Israel locations, in an operation labelled "Swords of Iron", as reservists were being called up.

"There are still 22 locations where we are engaging with terrorists that came into Israel, from the sea, from the land and from the air," said army spokesman Richard Hecht on what he labelled a "robust ground invasion".

Israeli army launched air strikes into Gaza later in the night while militants fired rockets, an AFP journalist reported.

Hamas earlier released images of several Israelis taken captive, and another army spokesman, Daniel Hagari, confirmed that "there are kidnapped soldiers and civilians.

"I can't give figures about them at the moment. It's a war crime committed by Hamas and they will pay the price."

Hecht said there was also a "severe hostage situation" in the Negev desert communities of Beeri and Ofakim east of Gaza.

The Islamist group started the multi-pronged attack around 6:30 a.m. (0330 GMT) with thousands of rockets aimed as far as Tel Aviv and Jerusalem, some bypassing the Iron Dome defence system and hitting buildings.

Hamas fighters — travelling in ground vehicles, motorised paragliders and boats — breached Gaza's security barrier and attacked nearby Israeli towns and military posts, opening fire on residents and passersby.

"Send help, please!" one Israeli woman sheltering with her two-year-old child pleaded as militants outside opened fire and tried to break into their safe room, Israeli media reported.

Bodies were strewn on the streets of the Israeli town of Sderot near Gaza and inside cars, the windscreens shattered by hails of bullets.

"I saw many bodies, of terrorists and civilians," one man told AFP, standing beside covered corpses on a road near Gevim Kibbutz in southern Israel.

"So many bodies, so many bodies."

AFP journalists witnessed Palestinian armed men gather around a burning Israeli tank, and others driving a seized Israeli military Humvee back into Gaza, where they were met by cheering crowds.

'Gates of hell'

Israeli army Major General Ghasan Alyan warned Hamas had "opened the gates of hell".

An AFP journalist in Gaza saw clouds of dust from the remains of bombed residential towers which Gaza's interior ministry said contained 100 apartments.

Israel's military said it had warned residents to evacuate before targeting the multi-storey buildings used by Hamas.

Israel's state-run electricity company cut the power supply to Gaza as army flares lit up the night sky.

The escalation follows months of rising violence, mostly in the occupied West Bank, and tensions around Gaza's border and at contested holy sites in Jerusalem.

Before Saturday, at least 247 Palestinians, 32 Israelis and two foreigners had been killed this year, including combatants and civilians, according to Israeli and Palestinian officials.

Hamas labelled its attack "Operation Al-Aqsa Flood" and called on "resistance fighters in the West Bank" as well as in "Arab and Islamic nations" to join the battle.

Its armed wing, the Ezzedine al-Qassam Brigades, claimed to have fired more than 5,000 rockets, while Hecht said Israel had counted more than 3,000 incoming rockets.

Hamas chief Ismail Haniyeh claimed the group was on the "verge of a great victory".

"The cycle of intifadas (uprisings) and revolutions in the battle to liberate our land and our prisoners languishing in occupation prisons must be completed," he said.

'Dangerous precipice'

Air raid sirens wailed across southern and central Israel, as well as in Jerusalem. In Tel Aviv, a gaping hole was ripped into a building, with residents boarding a bus to flee to safety.

The conflict sparked major disruption at Tel Aviv airport, where many carriers cancelled flights. Schools will remain closed on Sunday, the start of the week in Israel.

Hamas took control of Gaza in 2007, leading to Israel's crippling blockade of the impoverished enclave of 2.3 million people.

Israel and Hamas have since fought several wars. The last major military exchange, in May, killed 34 Palestinians and one Israeli.

In northern Gaza on Saturday, hundreds of people fled their homes, carrying food and blankets, an AFP correspondent said.

Violence also erupted across the West Bank, including annexed east Jerusalem, with five Palestinians killed and 120 wounded in clashes with Israeli forces and settlers, Palestinian medical services said.

Western capitals condemned the wave of attacks by Hamas, which Israel, the United States and the European Union consider a terrorist group.

European Commission President Ursula von der Leyen called the attack "terrorism in its most despicable form".

But Hamas drew support from other foes of Israel, with Iran's supreme leader declaring he was "proud" and Lebanese militant group Hezbollah praising the "heroic operation".

UN Middle East peace envoy Tor Wennesland warned of "a dangerous precipice" and called on all sides to "pull back from the brink".