The Gaza rocket caused no injuries – a fragment fell in the yard of a home in the southern Israeli city of Sderot, police said.
But it was the second this week to be fired from Gaza, and the first to hit Israel in months.
The armed wing of Islamist movement Hamas which rules Gaza fired several surface-to-air rockets at Israeli planes in response, Hamas officials said.
Another Israeli strike hit south of Gaza city, eyewitnesses said.
Hours before, Israeli police had blocked crowds of Jewish ultra-nationalist protesters from approaching the Muslim quarter in the Old City in east Jerusalem, to head off more Israeli-Palestinian violence after weeks of bloodshed.
Last year, a similar ultra-nationalist march was to begin in the Old City when the Islamist Hamas movement – rulers of the Palestinian enclave of Gaza – launched a barrage of rockets towards Israel, sparking an 11-day war.
More than a thousand ultra-nationalist demonstrators waving Israeli flags gathered in the early evening, but the police blocked the crowds from reaching Damascus Gate, the main entrance to the Muslim quarter.
The demonstrators voiced support for far-right lawmaker Itamar Ben Gvir, a controversial opposition politician. Some in the crowd shouted “death to the Arabs”.
Ben Gvir himself had been barred from the area of Damascus Gate earlier in the day by Prime Minister Naftali Bennett.
“I’ll say it clearly, I’m not going to blink, not going to fold,” Ben Gvir told AFP.
“I’m not allowed to enter Damascus gate. Based on what law?”
Tensions are high with the Jewish Passover festival coinciding with the Muslim holy month of Ramadan.
On Tuesday, Israel had carried out its first air strike on the Gaza Strip in months, in response to a rocket fired from the Palestinian enclave after a weekend of violence around a Jerusalem holy site that wounded 170 people, mostly Palestinian demonstrators.
UN Secretary-General Antonio Guterres said he was “deeply concerned by the deteriorating situation in Jerusalem”.
He added that he was in contact with the parties to press them “to do all they can to lower tensions, avoid inflammatory actions and rhetoric”, according to a statement by his spokesperson in New York.
Bennett had said earlier in a statement he had blocked Ben Gvir’s rally for security reasons.
“I have no intention of allowing petty politics to endanger human lives,” Bennett said in a statement.
“I will not allow a political provocation by Ben Gvir to endanger IDF (Israeli army) soldiers and Israeli police officers, and render their already heavy task even heavier”.
Ben Gvir responded that “some Jews don’t surrender to Hamas”.
Bennett, himself a right-winger and a key figure in Israel’s settlement movement, leads an ideologically divided coalition government.
Earlier this month, his coalition lost its one-seat majority in the 120-seat Knesset, Israel’s parliament, after a member left in a dispute over the use of leavened bread products in hospitals during Passover.
Then on Sunday, the Raam party, drawn from the country’s Arab-Israeli minority, suspended its support for the coalition following violence in and around the Al-Aqsa Mosque compound, known to Jews as the Temple Mount.
Clashes there between Palestinian demonstrators and Israeli forces left around 170 injured on Friday and Sunday.
Palestinians and Israeli Arabs had launched four deadly attacks in late March and early April in the Jewish state that claimed 14 lives, mostly civilians.
A total of 23 Palestinians have meanwhile been killed in the violence since March 22, including assailants who targeted Israelis, according to an AFP tally.
Right-wing lawmakers are under pressure to quit Israel’s government, which is seen by some on the right as being too favourable to Palestinians and Israel’s Arab minority.
Pnina, a 62-year-old civil servant demonstrating in Jerusalem on Wednesday, told AFP that “we want to go to all of Jerusalem, and our government is not letting us.”
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