"We've said that if there is rocket fire against the south of the country, there will be a severe and disproportionate Israeli response," Prime Minister Ehud Olmert said at the weekly cabinet meeting.
Israel -- which goes to the polls on February 10 -- has been hit by several rockets since a January 18 ceasefire brought an end to the 22-day war on the Hamas-ruled Gaza Strip.
"We will act according to new rules that will guarantee that we are not dragged into an incessant tit-for-tat war that will not allow normal life in the south of the country," Olmert said.
"The situation… in recent days has increased in a manner that does not allow Israel not to retaliate in order to make sure that our position... is understood by those involved in the fire.
"The response will come at the time, the place and the manner that we choose."
Defence Minister Ehud Barak said that "Hamas was given a very serious blow and if necessary it will be given another blow".
And Benjamin Ben-Eliezer, infrastructure minister and a member of Israel's powerful security cabinet, said Hamas had to pay for each rocket fired.
"We have set a price for each rocket fired and now Hamas has to pay," he told army radio.
The officials spoke after four rockets were fired from Gaza into Israel within a space of a few hours on Sunday.
But Hamas slammed the threats as a "campaign stunt" before the February 10 election.
"This is an attempt... to destroy the Egyptian efforts to improve the calm," Taher Al-Nunu said in a statement in Gaza.
Next week's election is expected to bring the Israeli right-wing back into power, according to opinion polls.
Olmert, forced to step down in September amid corruption probes, is not standing and his centrist Kadima party -- now led by Foreign Minister Tzipi Livni -- is trailing behind the right-wing Likud of former premier Benjamini Netanyahu.
In the aftermath of the Gaza war, the issue of security has jumped to the forefront of the election campaign.
The Hamas spokesman did not say whether the Islamists who rule Gaza were behind the rocket fire but called on "all groups to respect the national decision concerning the ground situation in Gaza".
The Al-Aqsa Martyrs Brigades, a group loosely linked to president Mahmud Abbas's Fatah movement, claimed responsibility for firing two projectiles on Sunday.
In all, at least seven rockets had been fired since mutual ceasefires by Israel and Hamas on January 18 brought an end to Israel's massive three-week onslaught on the territory that left more than 1,300 Palestinians dead. Thirteen Israelis were killed.
Egypt has been leading international efforts to consolidate the ceasefires into a lasting truce and Abbas is to head to Cairo on Sunday for talks on the situation. Hamas officials are also due in the Egyptian capital.
A senior Palestinian official close to Abbas said the Cairo talks are not expected to produce results until Hamas patches up differences between its representatives in Gaza and its exiled leadership in Damascus.
"There can't be progress on the truce and reconciliation talks until this issue is resolved, because until then, the Gaza leaders say one thing and the ones in Damascus say something completely different," the official said on condition of anonymity.
Abbas's secular Fatah party and its rival Hamas have been at odds since Hamas seized power in Gaza in June 2007, kicking out pro-Abbas forces after days of ferocious street battles.
The schism has been accentuated by the Gaza war, with Hamas's exiled supremo Khaled Meshaal calling in its wake for a new leadership to replace Abbas's Palestine Liberation Organisation, long internationally recognised as the representative of the Palestinian people.
Meshaal was in Tehran on Sunday for his first post-Gaza war visit.