SDEROT: Bloodied bodies in the streets, gunmen raiding door-to-door and news of captives taken to Gaza left Israelis terrified and in shock after the Palestinian militant group Hamas launched a surprise attack that was unprecedented in audacity and scale.

A resident reported seeing multiple bodies and bullet-scarred vehicles in the southern Israeli town of Sderot where groups of Hamas gunmen were still fighting Israeli troops 12 hours after the attack was launched.

"I went out, I saw loads of bodies of terrorists, civilians, cars shot up. A sea of bodies, inside Sderot along the road, other places, loads of bodies," said Shlomi from Sderot.

As night fell, at least 100 were reported dead and more than 1,000 wounded, according to Israeli media, with fighting still raging in more than 20 locations around the Gaza strip.

The assault, on the Jewish Sabbath and coinciding with the religious holiday of Simchat Torah, is unfolding as a major national trauma in a country proud of its strong military.

In one incident, young Israelis told of fleeing a dance party in the early hours of Saturday as Hamas gunmen backed by rocket barrages entered towns and villages by the border.

The rave party was attended by several hundred people near the Israeli kibbutz of Reim, witnesses said. Footage on social media showed dozens of people running through fields and along a road, escaping militants as gun shots were heard.

"The music stopped and there was a rocket siren," a young woman called Ortal told Israel's N12 News television. "Suddenly out of nowhere, they started shooting."

Another party goer, Esther Borochov, said a car had rammed her vehicle as she tried to flee before a young man told her and her friend to jump into his vehicle before he was shot point blank while she played dead until she was rescued.

"I couldn't move my legs," she told Reuters at the hospital. "Soldiers came and took us away to the bushes."

Israel's ambulance service said its crews were unable to reach the wounded in towns where fighting was ongoing. An ambulance was also attacked, Magen David Adom medical service said, one crew member was killed, it said.

The assaults on Israeli civilians were the deadliest since the Palestinian suicide bombing campaigns of the Second Intifada that hit the country's main cities some two decades ago.

Adding to the shock, Palestinian militant groups circulated footage on social media showing what they said were captured Israeli soldiers and civilians being driven into Gaza and hostages being held by more fighters inside Israel.

Israeli TV stations carried telephone calls from terrified residents of towns and kibbutzes speaking even as gunmen were trying to break into their shelters.

A woman identified as Ella, barricaded in a bomb shelter for hours in Be'eri kibbutz, where there were reports of 50 Israelis held hostage by Hamas, spoke live with N12 News.

"We can hear a lot of gunfire, we were told that terrorists are in the dining hall, we can hear a lot of shooting," she said. "I've lost contact with my family. I know my father has been kidnapped ... no one is telling us what's going on. I don't know if my mother is alive."