Israel said today it would support efforts by Egypt to reach a truce in the Gaza Strip but instructed the army to prepare for possible military action in the Hamas-controlled territory if mediation failed.
The decision by prime minister Ehud Olmert's security cabinet to hold off militarily for now followed Hamas's release this week of a hand-written letter by Gilad Shalit, an Israeli soldier captured by Gaza militants two years ago.
Israel has been pressing for progress on the Shalit case and an end to Hamas weapons smuggling as conditions for a truce that would aim to stop Gaza rocket attacks and Israeli incursions.
Hamas, which has demanded Israel ease its Gaza blockade in return for calm, said the Security Cabinet decision was "not serious" because of Israel's threat of a large-scale operation if its conditions were not met and truce talks collapsed.
US Secretary of State Condoleezza Rice, who has backed the Egyptian mediation effort, plans to return to the region this weekend to try to spur peace talks between Mr Olmert and Palestinian president Mahmoud Abbas.
Those talks have been marred by bitter disputes over Jewish settlement building, violence in the Gaza Strip and a corruption scandal that threatens to force Mr Olmert from office.
Mr Abbas had cautioned against any Gaza incursion, saying such violence could doom Palestinian statehood talks which the United States hopes can achieve can achieve a framework deal this year.
"The Security Cabinet decided this morning to support Egyptian efforts to achieve calm in the south and to end the daily targeting of Israeli civilians by the terrorists in Gaza," said Mr Olmert's spokesman Mark Regev.