Israel resumed a punishing air campaign against Gaza Tuesday after its Islamist foe Hamas rejected a six-hour truce and fired dozens of rockets over the border, killing a first Israeli.
The renewed strikes killed two Gazans, raising the Palestinian death toll in eight days of violence to 194, medics said.
The Israeli was killed in a rocket attack on an Israeli position near the Erez crossing with Gaza, the army said.
The 38-year-old civilian had been delivering food to soldiers serving in the area, a spokesman for the Israeli emergency services told AFP.
It was the first Israeli death of the conflict after nearly 1,000 rockets had been fired into the Jewish state. Four Israelis have been seriously wounded.
In an early-morning vote, Israel's security cabinet said it would accept an Egyptian proposal for a ceasefire to begin at 0600 GMT.
But Hamas officials said they had not been consulted on the proposal and would not halt fire without a full-fledged deal including Israeli concessions.
The movement's armed wing continued to fire dozens of rockets into Israel after the 0600 GMT deadline, sending tens of thousands scrambling for cover.
The army said two rockets were intercepted over Tel Aviv on Tuesday evening.
Overnight, Hamas's Ezzedine al-Qassam Brigades armed wing rejected the Egyptian proposal for a truce to be followed by talks.
Hamas spokesman Sami Abu Zuhri said the movement had not been consulted on the truce bid.
"We didn't get to see the Egyptian proposal except through the media," he said.
"The idea of halting fire before there is any agreement on the conditions laid out by the resistance is unacceptable and we reject it."
A top member of Hamas's exiled politburo, Mussa Abu Marzuq, sounded a more cautious note, saying the movement had no official position on the proposal and discussions were continuing.
Hamas has said it wants the end of Israel's blockade of Gaza and the opening of the Rafah border crossing with Egypt as part of a truce deal.
It also wants Israel to free Palestinians it rearrested after releasing them in a 2011 exchange for an Israeli soldier held by Gaza militants for more than five years.
- Israel to 'broaden' offensive -
Speaking on Tuesday morning, Israeli Prime Minister Benjamin Netanyahu warned Hamas that the Jewish state would not hesitate to resume its punishing campaign in and around Gaza.
"We responded positively to the Egyptian proposal to give a chance to deal with the demilitarisation of Gaza," Netanyahu said, referring to Hamas's arsenal of missiles and rockets.
"But if Hamas doesn't accept the ceasefire proposal -- and that's how it seems at this point in time -- Israel will have all the international legitimacy to broaden its military activity in order to achieve the necessary quiet."
At 1200 GMT, the Israeli army announced it was resuming air strikes, after militants fired 47 rockets from Gaza.
The fresh raids hit Gaza City, southern Khan Yunis and Rafah and killed two people, one in Khan Yunis and one in Gaza City, raising the toll in eight days of violence to 194.
Cairo's truce proposal was announced overnight, and urged both sides to halt the violence and travel to Egypt for talks.
Palestinian president Mahmud Abbas was due in Cairo on Wednesday, but it was unclear if Hamas officials there were continuing to discuss the truce bid and if Israeli officials would also travel to Egypt.
The proposal won support from Western governments.
"We are encouraged that Egypt has made a proposal to accomplish this goal that we hope can restore the calm that we are seeking," said US President Barack Obama.
German Foreign Minister Frank-Walter Steinmeier also urged Hamas to accept the Egyptian proposal, accusing the Islamists of holding Gaza "hostage."
But Turkish Prime Minister Recep Tayyip Erdogan put the blame entirely on Israel accusing it of carrying out "state terrorism" and a "massacre" of Palestinians in Gaza.
- Strikes resume across Gaza -
Israel launched Operation Protective Edge before dawn on July 8, hitting Gaza with an intensive air and artillery bombardment aimed at stamping out rocket fire.
Since then, 922 rockets have hit Israel, while another 207 have been intercepted by its Iron Dome air defence system, the army said.
In Gaza City on Tuesday, shortly after Israel resumed its air strikes, 44-year-old Suheil al-Hossari looked at the ruins of his home.
The door and doorframe of the three-storey building were the only parts of it left standing, surrounded by rubble and belongings, including a stack of blankets.
Hossari's neighbour received a call from the Israeli army before the strike, warning him to evacuate the building and its surroundings.
The warning meant no one was hurt or killed in the strike, a small comfort for Hossari.
"Everything is destroyed. The food we prepared for our iftar (Ramadan evening meal) is now under the ruins of my home," he told AFP.
"I don't have money for food, let alone to rent a new house. I will stay here in the open and rely on God's mercy."