The rocket landed in an open area in Ashkelon, Israel's southernmost city, with a population of 120,000. No casualties have been reported so far.
The attack on the city was the first rocket launch from Gaza on Israel since Sunday, and although Israeli military officials did not comment on whether or not they would now undertake retaliatory action, the development offered little hope for the current informal ceasefire.
Israel ended a devastating military operation in Gaza eight days ago, and Egypt, responding to U.S. pressure, has been intensifying efforts to mediate between the Israelis and Hamas.
Israeli Prime Minister Ehud Olmert had visited Ashkelon shortly before the rocket was launched.
Responsibility for the rocket attack was claimed by the Popular Front for the Liberation of Palestine, a small leftist militant group, but Israel held Hamas directly responsible.
"Hamas controls Gaza and they are responsible for every missile fired from Gaza into Israel," said government spokesman Mark Regev, going on to accuse Hamas of having an "extreme, violent and hateful" agenda.
Militants have launched around 20 Katyusha-type Grad rockets on Ashkelon since late February. The Russian-made rockets are more powerful and have a longer range than the more commonly used Qassam rockets
More than 120 Palestinians, many of them women and children, were killed last week in Israeli military operations in Gaza. The operation came as a response to rocket attacks from the enclave, which has been controlled by Hamas since a bloody conflict with the moderate pro-presidential group Fatah last June.
Last Thursday, in another round of the seemingly unstoppable tit-for-tat killings that have thwarted attempts to move toward a peace deal between Israel and the Palestinian territories, a Palestinian gunman shot eight students dead in the library of a Jewish seminary in Jerusalem before himself being gunned down. The killings were the worst terrorist attack the city had seen in four years.
