Palestinian Islamist group Hamas launched the biggest attack on Israel in years Saturday, killing at least 40 people and wounding hundreds in a surprise assault that combined gunmen crossing into Israel with a barrage of rockets fired from Gaza.

Israel said the Iran-backed group had declared war as its army confirmed fighting with militants in several Israeli towns and military bases near Gaza and Prime Minister Benjamin Netanyahu vowed to retaliate.

"Our enemy will pay a price the type of which it has never known," he said. "We are in a war and we will win it."