The group said that Baha Abu al-Ata was killed along with his wife when a missile hit their home on the third floor of a building in Shejaiya district of Gaza City, the BBC reported citing the PIJ as saying.
PIJ, which is backed by Iran, is the second largest militant group in Gaza and has carried out many rocket attacks on Israel.
The Times of Israel quoted the PIJ as saying in a statement that it was preparing for war with Israel in reaction to the incident.
"These terrorist crimes are aggression and a declaration of war on the Palestinian people, and the enemy bears for responsibility for them," the group added.
According to the Al-Quds Brigades (PIJ's military wing), Abu al-Ata, 42, was "one of the most prominent members of its military council and the commander of the northern part of the (Gaza Strip)."
The Palestinian militant group Hamas, which runs the Gaza Strip and is considered a rival of the PIJ, condemned Abu al-Ata's killing, vowing it "will not pass without punishment".
Meanwhile, the Israel Defense Forces (IDF) ordered schools closed in southern and central parts of the country, including the Tel Aviv metropolitan area, as terror groups in the Gaza Strip launched dozens of rockets at cities and towns in retaliation for the assassination, The Times of Israel said.
More than 50 rockets and mortar shells were fired from the Gaza Strip at central and southern Israel on Tuesday, according to the IDF.
Soldiers operating the Iron Dome missile defence system shot down 20 of those incoming projectiles, it added.
The military said it had sent a number of warnings to Abu al-Ata to call off his operations, but they went unheeded.
IDF spokesman Jonathan Conricus said: "We conducted the attack because there was no other choice."
( With inputs from IANS )