|PIC1|Israel has agreed to an Egyptian brokered truce with Hamas-led Palestinian militants in the Gaza Strip, starting at 6 a.m. (4:00 a.m. British time) on Thursday morning, an Israeli Defence official said on Wednesday.

Egypt and Hamas announced the deal on Tuesday but Israel held off on confirming its agreement. An Israeli Defence official, Amos Gilad, returned to Israel from overnight consultations in Egypt where he put the final touches to the deal.

"This is not a peace agreement. There is an understanding that is based on the effectiveness of military activities until now, and the will to stop it. At this point, we are exhausting the possibilities," Gilad told Israel radio.

Israel has said it would continue preparing for possible large-scale military action should a truce fall apart.

Hamas official ib Gaza Sami Abu Zuhri said the deal now "means that we have ... a binding agreement for both sides, the Palestinian and the Israeli."

"We in Hamas stress our full commitment to the agreement and the ball now is on the Israeli court to translate this agreement into actions on the ground," Zuhri said.

Israel's Defence Minister Ehud Barak sounded on Tuesday a more cautious tone but said Israel would give it every chance.

"It's early to herald a ceasefire, and even if it were to happen ... it is difficult to estimate how long it will last. The test will be in the implementation but it is important to give it a chance," Barak said in a speech north of Tel Aviv.

Senior Hamas leader Ismail Haniyeh said on Tuesday that his group believed the ceasefire would hold and would prove beneficial to the some 1.5 million Palestinians living in the coastal enclave.

Israeli and Palestinian officials said on Tuesday that under any truce accord, the blockade Israel imposed on the Gaza Strip after Hamas seized the territory a year ago from Palestinian President Mahmoud Abbas's more secular Fatah faction would be eased gradually and partially.

Israel has allowed in humanitarian aid but has cut back on the supply of non-essential goods, such as construction materials, as well as fuel, saying Gazans could not expect to lead normal lives while Israelis were under rocket attack.

A Palestinian source familiar with the ceasefire negotiations said the Israeli-run Karni and Sufa crossings would step up operations three days after the truce takes effect, with the flow of goods set at 30 percent of the levels before Hamas took over the Gaza Strip.

Ten days after the truce begins, Israel would ease limitations at Karni and Sufa, the source added, although some restrictions on certain goods would remain in place.