Israel launched its air offensive with the stated aim of halting all missile launches out of the Gaza Strip, which lies some 70 km (40 miles) south of Tel Aviv, a cosmopolitan city renowned for its nightlife and vibrant beach culture.

Hamas had warned when the latest conflict flared that it would not confine itself to unleashing rockets.

"This was a terror attack. There is a massive preparedness within the police and security forces. We must keep awareness to a maximum. These are not normal times," said Israel's Police Chief Yohanan Danino.

UN Secretary-General Ban Ki-moon denounced the attack, saying nothing justified the targeting of civilians.

The United States, Israel's main ally, also condemned the bus bombing. "These attacks against innocent Israeli civilians are outrageous," the White House said.

More than 140 Palestinians, more than half of them civilians, have died so far in Israel's Gaza offensive. Five Israelis, including one soldier, have also been killed.