In the West Bank, troops arrested 207 suspected Islamic militants in the toughest crackdown for months. Among those held were Hamas leaders Hassan Youssef and Mohammed Ghazal, known as a relative moderate in the group sworn to destroying Israel.
Troops are poised outside the Gaza Strip for a possible ground offensive. In a show of strength, artillery practiced near the boundary. Israeli media said the army operation was dubbed "First Rain".
Residents scattered in panic on Gaza streets as low flying Israeli warplanes made sonic booms. Helicopters hung overhead.
Palestinian leaders accused Israel of trying to wreck hopes of reviving peace talks that were kindled by the Gaza pullout.
President Mahmoud Abbas said that if Sharon had ordered the army to use full force it meant: "He doesn't want peace, or security, or negotiations."