Israeli tanks, planes and ground forces pounded Gaza and the defence minister said the offensive against Hamas militants in the Palestinian enclave would go on until Israel was safe.
International efforts to secure a ceasefire moved ahead with French President Nicolas Sarkozy and Middle East special envoy Tony Blair visiting the region, but they seemed able to offer little beyond words.
The death toll in besieged Gaza rose to at least 541 people over the 10-day offensive. Among yesterday's victims were 13 members of a Palestinian family in an Israeli strike on their home in a Gaza refugee camp, Palestinian medical officials said.
The Israeli army said "many dozens" of Hamas fighters had been killed since ground troops invaded on Saturday following a week-long air blitz to end rocket attacks by Hamas on southern Israel .
"Hamas has so far sustained a very heavy blow from us, but we have yet to achieve our objective and therefore the operation continues," Israeli Defence Minister Ehud Barak said.
The Jewish state launched the offensive after Hamas called off a six-month truce last month and stepped up attacks on the south, citing Israeli raids and a blockade of the enclave that Israel occupied from 1967 to 2005.
Hamas leaders rallied their combatants with defiant rhetoric yesterday as Israeli forces fought to secure positions in Gaza.
Thousands of fighters were waiting "in every street, every alley and at every house" to tackle them, Hamas military spokesman Abu Ubaida said in a broadcast speech.
He taunted the Israelis by saying Hamas would capture more soldiers to join one who has been held for more than two years.
Hamas will also increase its rocket strikes on Israel if the Israeli attacks on Gaza kept on, Mr Ubaida said.
A rocket hit the Israeli port city of Ashdod, damaging a building and wounding two people, police said.
Four Israelis have been killed by salvoes fired into Israel since the offensive began. An Israeli soldier was killed in fighting on Sunday and 48 have been wounded since the invasion.