"Israel's response policy is decisive and firm. It provides a firm answer to any harm caused to our citizens and soldiers.
This policy is known and will continue," Netanyahu told reporters at the start of the weekly cabinet meeting.
"Hamas and the other terror groups should know that they are responsible for their deeds," he said.
Two Israeli soldiers and two Palestinian militants were killed on Friday in the most deadly clash on the Israel-Gaza frontier since Israel ended an offensive there 14 months ago.
The Israeli army said an officer and a conscript were killed in an ambush by Palestinian gunmen against a military patrol.
The incident was followed by an Israeli army incursion into Khan Younis in the central Gaza Strip. The troops returned to Israeli territory on Saturday, and the violence subsided.
Israel unilaterally withdrew from the Gaza Strip in 2005 but has maintained a blockade of its border with the territory since Hamas took over the enclave in 2007.
Hamas has largely held its fire since a three-week war with Israel in the opening days of 2009 in which some 1,400 Palestinians, mainly civilians, and 13 Israelis, mostly soldiers, were killed.
But smaller factions have violated the de facto truce by firing rockets and mortar bombs into neighboring Israeli territory.
Tensions have run high along the Gaza frontier this month, with Israel launching repeated air strikes in response to Palestinian rocket attacks, one of which killed a Thai worker in a kibbutz last week.
