It was the third major escalation since July and came despite attempts by UN officials and Egypt to secure a long-term truce between Israel and Hamas, the Islamist movement that runs the Gaza Strip.
Two Palestinian officials said on condition of anonymity that Gaza militants halted rocket fire at noon on Thursday. One of the officials said "they consider this round of escalation over."
Israel's military declined to comment. Beginning on Wednesday night and into Thursday, fireballs and explosions shook the Gaza Strip while plumes of smoke rose from the enclave.
In nearby Israeli communities, residents scrambled to bomb shelters.
Most of the rockets fired by Palestinian militants landed in open areas, but at least two hit the Israeli town of Sderot near the Gaza Strip and sirens sounded throughout the night and into the morning. Medics reported at least four wounded taken to Israeli hospitals, including a 30-year-old Thai woman in moderate to severe condition after being injured in the Eshkol region bordering the Gaza Strip.
Israel's military reported seven civilians wounded.
Those killed in the Gaza Strip included Enas Khammash, 23, and her 18-month-old daughter Bayan, according to the health ministry in the Hamas-controlled enclave.
They were killed in an airstrike in Jafarawi in central Gaza, the ministry said, while her husband was injured. Khammash was also reportedly pregnant.
A Hamas militant was also killed in the strikes and at least 12 others injured, the health ministry said.
Before the Gazan decision to halt fire, rockets and mortars targeting Israel had continued sporadically on Thursday morning as had Israeli strikes in parts of the Gaza Strip.