Israel and the Palestinian Islamist group Hamas have agreed on a truce that will begin on Thursday, Egypt's state-owned news agency said today.
A senior Egyptian official told the Mena agency that both sides had "agreed on the first phase" of a package to end the violence on the Gaza Strip.
The apparent agreement comes despite Israeli aircraft targeting a car in southern Gaza today, killing all five militants inside.
Egypt has spent months attempting to broker a truce to end months of daily Palestinian rocket and mortar assaults on Israeli border towns.
Mena reported that the first phase of the agreement was a "mutual and simultaneous calm" in the coastal strip that will start 6am (4am BST) on Thursday.
A Hamas official in Gaza confirmed the truce. Israeli officials declined to confirm a deal, but said Israel's negotiator in the truce talks was rushing to Cairo and they were "cautiously optimistic".
An Israeli government spokesman, Mark Regev, said: "What is important is not only words but deeds. If there is a total absence of terror attacks from Gaza into Israel, and if there is an end to arms build-up in Gaza Strip and movement on the hostage Gilad Shalit, that will indeed be a new reality."
Israeli defence officials said they expected negotiations on Shalit, an Israeli soldier captured two years ago, to begin on Sunday, effectively confirming that a truce was in the works.
A Hamas spokesman, Ismail Ridwan, accused Israel of trying to derail the ceasefire efforts with today's bombing, but said the group remained open to a truce.
The smaller Islamic Jihad group was also leaving the door open to a halt in fighting, but said it would respond to the air strike.
Israel confirmed details of strike, saying it hit a car "carrying terror activists" in the southern town of Khan Younis. Two other Palestinians were wounded in a second air strike, Palestinian medical officials said.
The first stage of the deal would involve a 72-hour cessation of hostilities and an easing of the Israeli economic blockade that has deepened the poverty in already destitute Gaza, an Hamas official said.
Phase two would focus on Hamas returning Shalit and a deal to reopen Gaza's main gateway, the Rafah crossing with Egypt. The closure of Rafah has kept Gaza's 1.4 million people confined to the tiny seaside territory, and unable to bring in goods from Egypt.
"We are close to declaring an agreement on the calm, barring unforeseen developments," Sami Abu Zuhri, another Hamas spokesman, told the Associated Press before the air strike.
Khalil Abu Leila, a senior Hamas leader, told a Palestinian radio station today that "after the implementation of the calm, there will be non-stop meetings regarding the captured soldier".
The ceasefire would extend beyond Hamas and Israel to include other Palestinian militant groups.
Iranian-backed Gaza militants have been bombarding southern Israel with rockets and mortars for seven years. The rate of fire increased after Israel pulled its troops and settlers out of Gaza in 2005, and stepped up further last year after Hamas wrested power from forces loyal to the moderate Palestinian president, Mahmoud Abbas.
Israel has responded with air and ground attacks that have killed hundreds of Palestinians, many of them civilians. It has also imposed a strict blockade on Gaza, letting in only limited amounts of humanitarian aid, restricting fuel supplies and widening already rampant unemployment.
Ending the economic sanctions by opening Gaza's crossings with Israel and Egypt has been a key Hamas demand in the ceasefire talks.
This article was first published on guardian.co.uk on Tuesday June 17 2008. It was last updated at 15:26 on June 17 2008.