At least two homes in Sderot were damaged by rocket fire from the Gaza Strip Wednesday.
Over the past four months, 158 Palestinians have been killed by Israeli fire, including at least 120 in the protests near the fence and others in Israeli air strikes and other incidents elsewhere in Gaza, according to the Gaza Health Ministry and a local rights group.
The exchange came amid continued attempts by Egypt to broker a broad cease-fire deal between Israel and Hamas.
A truce between Hamas and Israel will be officially unveiled by the end of August, according to Turkey's official news agency Anadolu, quoting a Hamas source.
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Palestinians militants have also fired rockets into Israel and the Israeli military has carried out dozens of air strikes in the enclave.
Palestinian reports said the two were killed when IDF artillery struck a graduation ceremony of al-Qassam members at a Hamas base Askelan, northern Gaza, where senior Hamas figures were in attendance.
Three Israelis were reported wounded in a rocket attack on the southern city of Sderot. Approximately 70 rockets were launched from the Gaza Strip at Israel, the IDF said, adding that the Iron Dome aerial defense system intercepted 11 launches, with the majority of the projectiles striking open areas.
In an earlier statement, the Israeli military said gunmen had fired on its soldiers from a Hamas post, which was shelled by a tank in response.
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"I am deeply alarmed by the recent escalation of violence between Gaza and Israel, and particularly by today's multiple rockets fired toward communities in southern Israel", said U.N. Middle East envoy Nickolay Mladenov in an overnight statement. One vehicle was hit, the IDF Spokesman's Unit said; IDF tanks responded by attacking a Hamas position in the region.
In response to the rocket fire, the Israeli Air Force bombed 12 Hamas targets in Gaza.
Israel has lost tracts of farmland and forest to fires started by kites and helium balloons laden with incendiary material which have caused fires in Israeli forests and farmlands and flown over the border by Palestinians in Gaza.
The Gaza Health Ministry say pregnant 23-year-old Enas Khammash and her 18-month daughter were killed in Jafarawi in central Gaza.
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More than 160 Palestinians have been killed by Israeli forces - most during weekly protests at which thousands of Palestinians have expressed their support for the declared right of Palestinian refugees to return to their ancestral homes in what is now Israel. He said by the end of the month, all fuel supplied by the United Nations will run out "and the problem is there is no sign of renewed funding from donors in the horizon".