"Our policy is simple, if they (Hamas) will shoot, they will be hit back seven-fold," Xinhua quoted Netanyahu as saying on TV.
Israel will use "all means" to "restore the quiet" across the country, he added. His remarks came just a day after the indirect Gaza truce talks in Cairo collapsed.
On the reported assassination attempt of Hamas' military wing leader Mohammad Deif, which Israel refused to confirm, Netanyahu said "the commanders of terror organisations are a legitimate target, no one is immune".
Israeli air strike on Deif's home on Wednesday killed his wife and daughter, and triggered a barrage of more than 100 rockets fired into Israel. No injury was reported.
Israel in return carried out numerous air strikes in Gaza on Wednesday, in which Palestinian officials said at least 20 Palestinians have been killed since the cease-fire talks collapsed.