An Israeli official said Thursday Tel Aviv had agreed on a ceasefire with Hamas that will begin at 0300 GMT Friday, but the Islamist movement said it had "no information" on a deal.
Speaking on condition of anonymity, the Israeli official told AFP that Israel and Hamas "have agreed upon a ceasefire that will begin at 6:00am Gaza local time tomorrow."
Hamas refused to confirm the report, with spokesman Fawzi Barhum telling AFP: "We have no information about this agreement."
The potential breakthrough came as a major confrontation between Israel and Hamas militants entered its tenth day, with the fighting to far claiming 231 lives in Gaza and one in Israel in the worst fighting in and around the enclave in five years.
A fragile five-hour humanitarian ceasefire, called for by the UN, went into effect at 0700 GMT, but three mortars fired from Gaza hit Israel two hours later, the army said. Hamas denied any projectiles had been fired.
Minutes before the five-hour truce went into effect, Israeli tank fire hit a house in southern Gaza on Thursday, killing three people, medics said.
Gaza militants have fired nearly 1,400 rockets at Israel during the Israeli offensive, which began July 8, well over 1,000 of which have hit Israel, the Israeli army says.
Israel has launched more than 1,750 raids on Gaza.