Israeli artillery continued shelling areas in the Gaza Strip
Israeli forces in Gaza
Sixty-four MPs and officials were seized, amid Israeli efforts to secure freedom for a captured soldier in Gaza.
Israeli forces meanwhile massed at Gaza's northern border, as troops and tanks dug into positions in the south, a day after their original incursion.
Air strikes have damaged infrastructure in Gaza without causing casualties.
Much of Gaza has been left without electricity and running water after a power plant was hit, while several bridges were also destroyed, preventing travel between the north and south of the 45km Strip.
The Israeli army dropped leaflets in northern Gaza urging residents to avoid moving in the area because of impending military activity
They are not bargaining chips for the return of the soldier. It was simply an operation against a terrorist organisation
Israeli army spokeswoman
Press review Voices from Gaza
The militants escaped, although one was lightly injured in the blast, witnesses said.
Separately, the body has been found of an Israeli settler who Palestinian militants abducted and killed at the weekend. The body of Eliyahu Asheri, 19, was found in a shallow grave near the city of Ramallah.
Another missing Israeli, who militants also claimed to have seized, was found dead, apparently from natural causes.
'Blackmail'
Hamas has condemned Israel's seizure of its officials.
Gaza Strip in detail
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But an Israeli army spokeswoman told Reuters the detainees "are not bargaining chips for the return of the soldier".
"It was simply an operation against a terrorist organisation," she was quoted as saying.
The detained ministers include Finance Minister Omar Abdal Razeq, Social Affairs Minister Fakhri Torokma and Prisoners' Affairs Minister Wasfi Kabha and Deputy Prime Minister and Education Minister Nasser Shair.
The BBC's Alan Johnston in Gaza says Israel is dramatically stepping up pressure on the Hamas government to secure the soldier's release.
Cpl Gilad Shalit was seized by Palestinian militants in an attack on an Israeli border post on Sunday, that also left two Israeli soldiers and two militants dead.
'Wanton destruction'
We are living, but we feel as if we are dead
Doaa Abu-Harb
Student, Rafah
In pictures: Gaza offensive Seized settler found dead
Air strikes continued throughout Wednesday, with missiles striking a road near Khan Younis refugee camp and a sports field of the Islamic University in Gaza City.
Nervous civilians in the north stockpiled batteries and candles, as well as food and water.
In southern Gaza, where the Rafah crossing with Egypt has been closed since Cpl Gilad's capture, militants blew a large hole in the border wall.
Palestinian security forces stopped people from pushing through the gap by forming a human cordon and a curfew was imposed.
Palestinian Authority President Mahmoud Abbas called the air strikes collective punishment.
Amnesty International, the human rights group, called for all hostages to be released and for "an end to the wanton destruction and collective punishment" by Israel.
'Self defence'
Prime Minister Ismail Haniya, of Hamas, criticised Washington for giving approval to the Israeli incursion.
CAPTURED ISRAELI SOLDIER Cpl Gilad Shalit, 19 First Israeli soldier captured by Palestinians since 1994
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A spokesman for US President George W Bush said Israel had a right to defend itself and the lives of its citizens.
The spokesman said Hamas must shoulder the blame for the Israeli assault because militants linked to it had captured Cpl Shalit.
Mr Haniya urged the UN Security and Arab League to move to end the crisis.
"The Israeli occupation must put an end to its aggression before the situation gets complicated and the crisis gets worse," Mr Haniya said.
UN Secretary General Kofi Annan said he hoped for a swift diplomatic solution to the crisis in Gaza. He warned that the crisis risked inflaming tensions across the region.
A 3,000 strong detachment of the Israeli Defense Forces has moved back into the Gaza Strip only months after withdrawal of settlements from the area. Eight Hamas cabinet ministers, in addition to other officials, have been detained in a coordinated action codenamed Operation Summer Rains. The pre-planned operation was launched in immediate response to what Israel said was the kidnap of 19-year-old Israeli tank gunner Cpl. Gilad Shalit on 25 June.
Map of the Gaza Strip.
Three bridges in the Gaza Strip have been bombed for the stated purpose of restricting the movement of the hostage takers and the hostage. 

In other operations a helicopter attack on a power station in Gaza plunged large portions of the Gaza Strip into darkness, leaving somewhere around 700,000 civilians without electricity or water. While Israeli troops and armored vehicles, lead by bulldozers, also moved into Gaza near a disused international airport. 

There were also reports of Israeli warplanes making warning flights over Syria in what has been reported to be a warning "against supporting Palestinian militants."

"Fight your enemies, who came to their deaths. Grab your rifles and resist," said Nizar Rayan in a radio message to Palestinian militants. Despite this exhortation, there were no immediate reports of casualties or conflicts.

"We have no desire to remain in the Gaza Strip," said Israeli National Infrastructure Minister Binyamin Ben-Eliezer, on  Israel Radio, although he did not give a timetable for the operation. "We want to bring our boy home, that's all."

The Popular Resistance Committees threatened to kill an Israeli soldier, kidnapped in the West Bank. The body of an 18-year-old Israeli settler, Eliyahu Yitzhak Asheri, kidnapped while hitchhiking in the West Bank, was found in the A-Tira neighbourhood of Ramallah today; he was killed by Palestinian militants from the Popular Resistance Committees on Sunday. 

Israel has also detained dozens of Hamas MPs and ministers in a what Israel claims is an unrelated operation. An Israeli official denied the capture as a use for bargaining with the kidnappers saying, "They are not bargaining chips for the return of the soldier - it was simply an operation against a terrorist organisation."