Israel and Hamas, the Islamist group that rules the Gaza Strip, have agreed on a truce, an agreement that would end an escalation in fighting that has drawn mutual threats of war.
There was no formal comment, but an Israeli official denied a cease-fire had been reached. Israel rarely acknowledges reaching any such agreement with Hamas, a group it designates as a terrorist organisation and with whom it has fought three wars in the past decade.
A surge in cross-border rockets and air strikes in recent weeks have prompted the United Nations and Egypt to try to broker a truce to prevent another all-out conflict.
On Wednesday night and Thursday, Israeli aircraft struck more than 150 targets in Gaza and Palestinian militants fired scores of rockets including a long-range missile deep into Israel, escalating fighting despite the ongoing truce talks.
"Egyptian efforts managed to restore calm between Palestinian factions and Israel that will end the current escalation," a Palestinian official said.
"Palestinian factions will respect calm as long as Israel does," he told Reuters.
Hours earlier, after the long-range Palestinian missile attack, the first of its kind since a 2014 war, Israeli air strikes had resumed after a short lull, flattening a multi-storey building that the Israeli military described as a Hamas headquarters.
A pregnant Palestinian woman and her 18-month-old child were killed in the Israeli attacks overnight on Wednesday, as was a Hamas militant, Gaza medical officials said.
Hundreds of people took part in the funeral for the woman and child.
The Israeli military said seven people were wounded by Palestinian rockets and mortars that hit southern Israel.
Ambulance sirens echoed through the night in Gaza, where families huddled at home as powerful explosions thundered through the strip. Across the border rocket warning sirens sounded almost non-stop from sunset on Wednesday in Israeli towns and villages where residents sheltered in bunkers.
Egypt and the UN have been trying to mediate a comprehensive cease-fire to prevent an escalation in fighting and to ease the deep economic hardship in Gaza, a narrow strip of land that is home to two million Palestinians.
Israel captured Gaza in the 1967 Middle East war but withdrew in 2005, while holding onto most of the separate West Bank, where Palestinians have limited self-rule.
For more than a decade Gaza has been controlled by Hamas under an Israeli-Egyptian blockade that has collapsed its economy, creating what the World Bank has described as a humanitarian crisis with shortages of water, electricity and medicine.