The Israeli army on Sunday announced the death of Hadar Goldin, a soldier who had been missing in the Gaza Strip, as both sides of the conflict vowed to keep fighting.
A special committee led by the army's chief rabbi said Lieutenant Goldin had been "killed in battle in the Gaza Strip on Friday", the Israeli armed forces said in a statement.
Military radio said that no body had been recovered, adding that this made the decision to announce Goldin's death a "very delicate" one.
There was no government word on the whereabouts of the soldier's remains.
The Israeli side had previously suggested that 23-year-old Goldin had been captured by Hamas fighters in Gaza, sending chances of a more permanent ceasefire in the bloody offensive nosediving. Such captures are considered by Israel to be casus belli.
Hamas's armed wing, the Ezzedine al-Qassam Brigades, had acknowledged its militants staged an ambush early Friday in which two other Israeli soldiers were killed, but denied holding Goldin.
Also Sunday an army spokesman told AFP Israel has begun withdrawing some ground troops from the Gaza Strip and redeploying others but the mission was ongoing.
"We are removing some (forces), we are changing from within," Lieutenant Colonel Peter Lerner said, describing it as "an ongoing mission".
"We are redeploying within the Gaza Strip and taking out other different positions, and relieving other forces from within," he said.
Both Israel and Hamas vowed Saturday to continue their bloody 26-day confrontation in Gaza, shunning efforts to broker an end to the bloodshed which has claimed more than 1,700 lives.
With no resolution in sight, a senior Palestinian delegation landed in Cairo for talks Sunday on an Egyptian ceasefire initiative, but Israel said it was not sending a negotiating team.
"Hamas has proven that it breaches any agreement reached right away, as happened five times in previous truces," deputy foreign minister Tzahi HaNegbi told AFP.
"It is therefore unclear at this stage what benefit Israel might see for participating in an attempt to reach agreements, based on the Egyptian initiative," he added.
US Middle East envoy Frank Lowenstein is expected to arrive for talks, along with representatives of both Hamas and Islamic Jihad.
The Gaza violence has claimed 1,720 Palestinian lives and displaced up to a quarter of the territory's population.
Goldin's death brings Israeli army deaths to 64 since the start of hostilities on July 8, its heaviest toll since the 2006 war against the Lebanese Hezbollah.
- 'As much force as needed' -
Earlier Saturday, Israel pulled back troops from two areas in Gaza in what was initially interpreted as a sign it was winding down its biggest military operation there in decades.
The army informed residents of Beit Lahiya and Al-Atatra in the north that it was "safe" to return home.
Troops were also seen pulling out of villages east of Khan Yunis in the south, in the first such moves since the Israeli operation began last month.
But there appeared to be little further indication Israel was planning to wrap up its operations, with Prime Minister Benjamin Netanyahu promising that Hamas would pay "an insufferable price" for continued cross-border rocket fire.
"We will take as much time as necessary, and will exert as much force as needed," he said at a news conference, adding that troops had also dealt a "significant blow" to Hamas's infrastructure.
Troops would complete their mission to destroy a complex network of tunnels used by militants to infiltrate southern Israel before the next security objectives would be decided, he said, warning that "all options" were on the table.
- 'Netanyahu facing real crisis' -
Exiled Hamas chief Khaled Meshaal insisted that the Palestinian side had not broken the short-lived ceasefire, putting the spotlight on Israel.
"A truce is a truce. but the presence of the Israeli forces inside Gaza and destroying the tunnels means it is an aggression," he told CNN in an interview late Saturday.
A spokesman for the Islamist movement mocked Netanyahu's statements as "confused", and as testimony of the "real crisis" he was facing.
"We will continue our resistance till we achieve our goals," Hamas spokesman Fawzi Barhum told AFP.
Israel had said Friday it believed the soldier Goldin had been captured near the southern Gaza city of Rafah. Immediately afterwards, Israel bombarded the Rafah area in shelling that is still ongoing, with medics saying at least 110 people were killed in 24 hours.
Meanwhile, air strikes and tank fire continued pounding huge areas of southern Gaza into rubble, killing scores more people on Saturday, as militants kept up their cross-border fire, with 56 rockets hitting Israel and another six downed, including two over greater Tel Aviv.
Thousands of protesters, many wrapped in Palestinian flags, rallied outside the White House in Washington on Saturday to call for peace and an end to the fighting in Gaza.