Israel extended a humanitarian ceasefire in the Gaza Strip for another 24 hours, but Hamas, which dominates the coastal enclave, said it would only accept the truce if Israeli troops left the territory.
Israeli ministers had signaled that a comprehensive deal to end the 20-day conflict with Hamas and its allies, in which at least 1,050 Gazans - mostly civilians - have been killed, and 42 soldiers and three civilians in Israel have died, was remote.
"At the request of the United Nations, the cabinet has approved a humanitarian hiatus until tomorrow at 2400 (midnight local time, 1700 EST Sunday)," the official, who was not named, said in a statement after the cabinet session held in Tel Aviv had ended. "The IDF (Israel Defence Forces) will act against any breach of the ceasefire."
On Saturday, Gazans took advantage of the lull in fighting to recover their dead and stock up on food supplies, flooding into the streets after the ceasefire began at 8 a.m. (0100 EST) to discover scenes of massive destruction in some areas.
The positions of both Israel and Hamas regarding a long-lasting halt to hostilities have remained far apart.
Hamas wants an end to an Israeli-Egyptian blockade of Gaza before agreeing to halt hostilities. Israeli officials said any ceasefire must allow the military to carry on hunting down the Hamas tunnel network that crisscrosses the Gaza border.
Israel says some of the tunnels reach into Israeli territory and are meant to carry out attacks on its citizens. Other underground passages serve as weapons caches and Hamas bunkers. The IDF said it had uncovered four such tunnel shafts inside Gaza during the truce on Saturday.
The Israeli official added that troops would continue to act against any breaches of the ceasefire, adding that the military would continue to act against the tunnels during the entire 24-hour period.
He said the cabinet would reconvene on Sunday to consider a continuation of the operation "until calm is restored to Israeli citizens for an extended period."
The Gaza turmoil has stoked tensions amongst Palestinians in Arab East Jerusalem and the occupied West Bank.
Medics said eight Palestinians were killed on Friday in incidents near the West Bank cities of Nablus and Hebron - the sort of death toll reminiscent of previous uprisings against Israel's prolonged military rule there.
On the diplomatic front, international efforts to bring an end to hostilities and secure a longer-lasting truce were being led by U.S. Secretary of State John Kerry in Paris.
Kerry, who has been spearheading international efforts to end the fighting, arrived in Paris on Saturday where he met the foreign ministers of France, Italy, Britain, Germany, Turkey and Qatar.
"All of us call on the parties to extend the humanitarian ceasefire that is currently under way," French Foreign Minister Laurent Fabius said after the meeting.
But an Israeli security cabinet minister, Gilad Erdan, said on Saturday that a definitive deal looked remote, with no representatives from Israel, Egypt or the Palestinian Authority attending the Paris talks.
The deputy leader of Islamic Jihad, a militant group allied to Hamas, said Egypt's mediation efforts were still being considered but improvements were being sought and, in the meantime, the fight would go on.
"We are still open to the Egyptian initiative and there are hot contacts to improve it ... We are going to pursue the battle until the blockade is ended. The resistance carries our demands," he said in a text message to reporters.
Gaza Health Ministry spokesman Ashraf Al-Qidra said rescue teams had taken advantage of the truce to search wrecked neighborhoods and had recovered some 147 bodies.
Stunned residents of Beit Hanoun wandered through destroyed streets lined with damaged houses or mounds of rubble where once whole buildings had stood.
"Pull yourself together, be strong! Aren't you used to this by now?" one man barked at a sobbing younger relative, only to break down himself. "God help us!" he moaned.
Israeli tanks stood by as people searched through the debris for their belongings, packing whatever they could, blankets, furniture and clothes into taxis, trucks, rickshaws and donkey carts before fleeing the town.
Naser Tattar, director of Gaza's main Shifa hospital, said most of the bodies recovered on Saturday came from Beit Hanoun, Khan Younis and Shejaia - a district east of Gaza City that has witnessed huge clashes between Israeli troops and militants.