A Hamas official said Egyptian mediators had clinched a truce with Israel on Tuesday that would go into effect within hours, but Egypt and Israel said a Gaza ceasefire deal was still up in the air after a week of fighting.
"The talks are still continuing," an Egyptian official, who declined to be identified, told Reuters. He said Cairo was hopeful of an agreement later in the day.
Israel pressed on with its air strikes in Gaza on the seventh day of its offensive and Palestinian rockets still flashed across the border as U.S. Secretary of State Hillary Clinton headed to the region after attending an Asian summit.
The Jewish state launched the offensive last week with the declared aim of halting the rocketing of its towns from the Palestinian enclave, ruled by the militant group that does not recognise Israel's right to exist.
Medical officials in Gaza said 21 Palestinians were killed on Tuesday. An Israeli soldier died when a rocket exploded near the Gaza frontier.
Gaza medical officials say 130 people have died in the strikes, mostly civilians, including 31 children. Three Israeli civilians were killed by a missile last week.
Clinton was expected in Jerusalem late on Tuesday to meet Prime Minister Benjamin Netanyahu, who said that Israel was open to a long-term deal aimed at ending Palestinian rocket attacks that have plagued its southern region for years.
Khaled Meshaal, leader of the Hamas Islamist movement that governs the Gaza Strip, said on Monday that Israel must halt its military action and lift its blockade of the Palestinian coastal enclave in exchange for a truce.
Both Netanyahu, favoured to win a January national election, and U.S. President Barack Obama have said they want a diplomatic solution, rather than a possible Israeli ground operation in the densely-populated territory of 1.7 million Palestinians.
Speaking to Reuters from Cairo, where intensive efforts have been under way to end the violence, Hamas official Ayman Taha said "an agreement for calm has been reached". He said it would be declared at 1900 GMT and take effect at 2200 GMT.
Netanyahu spokesman Mark Regev told Reuters Taha's announcement was premature and Israeli military operations in Gaza would continue in parallel with diplomacy.
"We're not there yet," Regev said on CNN. "The ball's still in play."
Hamas spokesman Sami Abu Zuhri, speaking after Taha made his remarks, said the group was still waiting to hear whether Israel would accept the terms of a deal.
"Cairo informed us they expect the response to be positive," Abu Zuhri said.
Israel's military on Tuesday targeted about 100 sites in Gaza, including ammunition stores and the Gaza headquarters of the National Islamic Bank.
Police said more than 150 rockets were fired from Gaza by the evening.
"No country would tolerate rocket attacks against its cities and against its civilians. Israel cannot tolerate such attacks," Netanyahu said with U.N. Secretary-General Ban Ki-moon, who arrived in Jerusalem from talks in Cairo, at his side.
"If a long-term solution can be put in place through diplomatic means, then Israel would be a willing partner to such a solution," he said. "But if stronger military action proves necessary to stop the constant barrage of rockets, Israel will do what is necessary to defend our people."
HAMAS TARGETS JERUSALEM AGAIN
In an attack claimed in Gaza by Hamas's armed wing, a longer-range rocket targeted Jerusalem on Tuesday for the second time since Israel launched the air offensive.
The rocket, which fell harmlessly in the occupied West Bank, triggered warning sirens in the holy city about the time Ban arrived for truce discussions. Another rocket damaged an apartment building in Rishon Lezion, near Tel Aviv.
Rockets fired at the two cities over the past week were the first to reach them in decades, a sign of what Israel says is an increasing threat from Gaza militants.
In the Gaza Strip on Tuesday, Hamas executed six alleged collaborators, whom a security source quoted by the Hamas Aqsa radio said "were caught red-handed" with "filming equipment to take footage of positions". The radio said they were shot.
Militants on a motorcycle dragged the body of one of the men through the street.
Along Israel's sandy, fenced-off border with the Gaza Strip, tanks, artillery and infantry massed in field encampments awaiting any orders to go in. Some 45,000 reserve troops have been called up since the offensive was launched.
A delegation of nine Arab ministers, led by the Egyptian foreign minister, visited Gaza in a further signal of heightened Arab solidarity with the Palestinians.
Egypt has been a key player in efforts to end the most serious fighting between Israel and Palestinian militants since a three-week Israeli invasion of the enclave in the winter of 2008-9. Egypt has a 1979 peace treaty with Israel seen by the West as the cornerstone of Middle East peace, but that has been tested as never before by the removal of U.S. ally Hosni Mubarak as president last year in the Arab Spring uprisings.
Mohamed Mursi, elected Egyptian president this year, is a veteran of the Muslim Brotherhood, spiritual mentors of Hamas, but says he is committed to Egypt's treaty with Israel.
Mursi has warned Netanyahu of serious consequences from an invasion of the kind that killed more than 1,400 people in Gaza four years ago. But he has been careful so far not to alienate Israel, or Washington, a major aid donor to Egypt.