Israel's military says it carried out 92 air strikes on Wednesday in response to 137 rockets fired from Gaza.Hamas says the wife and child of its military commander, Mohammed Deif, were killed in an Israeli strike on Tuesday.
Hostilities resumed on Tuesday, with each side blaming the other for the collapse of peace talks in Cairo.
Six weeks of fierce fighting have left at least 2,103 people dead.
Egypt has expressed "profound regret" at the end of the 10-day period of calm during the talks, and said it will continue to try to secure a lasting truce.
Meanwhile, the 15-member UN Security Council has voiced "grave concern" at the resumption of the hostilities and "called upon the parties to resume negotiations to urgently reach a sustainable and lasting ceasefire".
'We will not stop' In a televised address, Mr Netanyahu said he was "determined to continue the campaign with all means and as is needed."
"We will not stop until we secure full security and quiet for the residents of the south and all citizens of Israel.''
He likened Palestinian group Hamas to the jihadist group Islamic State, calling them a "branch of the same tree".
Hamas spokesman Fawzi Barhum said Mr Netanyahu's statement was "an attempt to rationalise defeat and cover up failures".Earlier on Wednesday, a Hamas official said Mr Deif was "still alive and leading the military operation" against Israel.
Israeli Interior Minister Gideon Saar said the attack was justified because Mr Deif was "personally responsible" for dozens of deaths.
Yaakov Perry, Israel's science minister and former security service chief, said he was "convinced that if there was intelligence that [he] was not inside the home, then we would not have bombed it".
There were further Israeli air strikes on Gaza on Wednesday which, according to local medics, killed a heavily pregnant woman and several children.
Our correspondent says the apparent attempt to kill Mohammed Deif may explain the intensity of the rocket fire that came after the collapse of the Cairo peace talks.
The air strike that killed his wife and young son on Tuesday is thought to have been intended to kill Mr Deif himself, correspondents say.
Mr Deif - the commander of Hamas' armed wing, the Izz al-Din al-Qassam Brigades - has survived a number of previous Israeli assassination attempts believed to have left him with severe disabilities.
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