In retaliation the Israeli Air Force struck over 100 military sites in Gaza including training areas, production complexes, a factory used for producing materials used for building tunnels, a tunnel intended for maritime terrorism as well as other strategic Hamas targets on their military sites which held a variety of weapons, rockets as well as a military compound that serves as a central logistic warehouse. Israeli medics reported that four wounded people were taken to hospital.
Gaza residents reported several Israeli airstrikes after the Palestinian rocket barrage.
The Gaza Health Ministry said that a Hamas fighter and the two civilians were killed in separate incidents.
The latest flare-up in the south came as negotiations over a long-term ceasefire - mediated by the United Nations and Egypt - continued.
Despite the escalation between the two sides, The Associated Press quotes an unnamed Hamas official as saying that cease-fire talks were in their final stage even though disagreements persisted.
On Wednesday, Israeli Prime Minister Benjamin Netanyahu convened an emergency meeting of his security Cabinet - which includes Defense Minister Avigdor Liberman and senior army commanders - to discuss mounting tensions along the Gaza-Israel buffer zone.
Hamas has denied it launched the rocket at Beersheba, blaming a militant Salafi group in the strip instead.
Israel has not commented on the reported casualties in Gaza yet.
"This is a blatant crime and Israel is responsible for it", he said.
"The joint factions command responded to the Israeli aggression", the source said, refering to the killing on Tuesday of two Hamas members.
The gathering had raised hopes a deal for a lasting truce with Israel, with the backing of Egypt and the United Nations. Hamas said two of its fighters were killed after taking part in a gunfire parade inside a militant camp.
In another round of escalation, Israel responded to rocket fire by striking what it says are Hamas militant targets in Gaza. "We are closing in on operation in Gaza", he said.
Islamic militant group Hamas has controlled the Gaza Strip since Israel disengaged from the region in 2005. He said Israel has offered only an easing, but not an end, to the blockade. "If the current escalation however is not contained immediately, the situation can rapidly deteriorate with devastating consequences for all people".
Last week, the Ministry of Health in Gaza issued statistics regarding the number of killed and injured Palestinian protesters during "The Great March of Return" protests since March 30th until the end of July.
Almost 160 Palestinians have been killed and some 17,500 others wounded in the fresh wave of violence, according to the latest figures released by the Palestinian Health Ministry.
The video was also shared by at least one account in Gaza as proof that Hamas should not be messed with and will hit back if attacked. Our strong commitment to the State of Israel's right to defend its borders and civilians is uncompromising.