The Prime Minister, Yitzhak Rabin, vowed to wage 'merciless' war against the guerrillas, and warned that the world should not be surprised by harsh new security measures: 'We'll use whatever we can, within the limits of our laws, to cope with this terror, and the atrocities that are carried out.'
Mr Rabin described Toledano's killers as 'the lowest of men, wild animals'. Hamas described them as 'holy warriors' and promised more such kidnappings.
The corpse was found early yesterday by a bedouin woman; it had been tossed in a gulley on the edge of a road in the Judean desert. The 29-year-old border guard, kidnapped on his way to work two days ago by the Islamic Resistance Movement, Hamas, was still in uniform, stabbed through the neck and probably strangled.
'His body was twisted. The fist was clenched,' said an army spokesman, clenching his own fist at the scene, where soldiers hunting for evidence were drenched in the driving rain, as were the bedouin in their tents. The Arab woman who found Toledano had been out to round up a camel, she told reporters.
The discovery, just two miles west of the Good Samaritan's tomb on the road between Jerusalem and Jericho, brought a shocking, though predictable, end to the crisis which began when Hamas demanded the release of its leader, Sheik Ahmed Yassin, in return for the border guard. A deal was never really likely. Israeli sources said last night Toledano may have been murdered before the deadline for an exchange.
In the Gaza Strip, where 700,000 Palestinians have been confined to their homes under strict curfew, the United Nations was preparing to bring in emergency food supplies. Throughout Gaza and the West Bank more than 1,200 arrests were made, including Hamas leaders and a journalist with Reuters news agency.
Mr Rabin sought to show authority, control and calm in the face of raw emotion and political mud-slinging. 'We will bite our lips and we will continue, and we will be victorious,' he said. 'No stone, no Molotov cocktail, no knives, no Hamas, no Ahmed Yassin, no Yasser Arafat, will stop us. We will live here for ever. Terror has no chance.'
At the same time, the Labour leader emphasised that Israel will pursue the peace process, and will not abandon the current negotiations.
It is fast becoming clear, however, that playing both man of peace and man of war is an increasingly hard act for Mr Rabin. As a former defence minister, known for his 'iron fist', he can be as hard as anyone on the gunmen. But he has also promised security through negotiation.
After Toledano's murder, bringing the December death toll in the conflict to six Israeli soldiers and 11 Palestinians - the highest since the peace talks began - Mr Rabin's promises are being torn apart by his right-wing critics.
Benjamin Netanyahu, a former minister in the Likud government, and tipped as the party's new leader, said: 'The escalation in terror is not coincidental. It is the result of weakness.'