Israel indicated Wednesday it was prepared to extend a 72-hour ceasefire with Hamas unconditionally in the Gaza Strip as Egyptian mediators accelerated efforts to broker a longer-term truce.
Guns fell silent in the tiny Palestinian enclave on Tuesday morning, allowing millions of people on both sides to breathe a sigh of relief after the deaths of 1,875 Palestinians and 67 on the Israeli side.
With the truce due to expire at 0500 GMT on Friday morning, Egyptian mediators shuttled between Israeli and Palestinian delegations in Cairo, conveying conflicting demands for a long-term calm.
"Israel has no problem extending the ceasefire unconditionally," an Israeli official told AFP on condition of anonymity. There was no immediate reaction from Hamas.
A spokeswoman for the Israeli army confirmed earlier that 27,000 reservists called up for the conflict had been sent home, leaving a force of 55,000 still on active duty, in another sign of growing hopes for long-term quiet.
In the battered Gaza Strip, shops, banks and markets have reopened, and people crowded into the streets.
Emergency services cleared rubble and searched for bodies in worst-hit areas, among them Tuffah and Shejaiya near Gaza City, Khuzaa and an area east of Rafah on the southern border with Egypt.
In the southern town of Rafah, volunteers dug graves for the burial of bodies stacked in morgues while the fighting raged.
Many residents are angered by the extent of damage to their homes.
"Look at my house, it is totally smashed. How can my children live here?" asked Mussa Abu al-Rus whose house had been taken over by Israeli soldiers.
Nearly half a million Palestinians were displaced by Israeli bombardment, and many are still sheltering in schools after their homes were flattened in the offensive.
-Israel says actions 'proportionate'-
In Jerusalem, Israeli Prime Minister Benjamin Netanyahu launched a vigorous defence of the conflict in the face of international criticism over heavy Palestinian civilian casualties.
"I think it was justified. I think it was proportionate and that doesn't in any way take away the deep regret we have for the loss of a single civilian casualty," Netanyahu said in his first public remarks since the ceasefire came into effect.
Israel had faced growing international, including US criticism, over the heavy number of Palestinian civilian casualties. Its loss of 64 soldiers is its most severe since the 2006 war against Hezbollah.
UN Secretary General Ban Ki-moon warned that after three wars in Gaza in six years, international patience with both sides was being tested.
He opened a special meeting of the UN General Assembly with an appeal for a lasting peace.
"The senseless cycle of suffering in Gaza and the West Bank, as well as in Israel, must end," he said.
In Jerusalem, Netanyahu showed reporters aerial images of homes and of a UN-run school, from which he said Hamas fired mortars and rockets.
He accused the armed faction of deliberately increasing the death toll by using human shields and called on the international community to ostracise the group "for its callous abuse of civilians."
"Every civilian casualty is a tragedy, a tragedy of Hamas's own making," he added.
Egyptian officials mediating talks for a durable truce in Gaza met a Palestinian delegation to relay terms laid down by an Israeli team overnight, Palestinian officials said.
Hamas officials have publicly rejected an Israeli demand for Gaza to disarm.
-'We won't yield'-
Ismail Haniya, Hamas's top Gaza-based official, was defiant ahead of the talks, saying the Palestinian side would "not yield on any of our demands."
The Palestinians have insisted Israel end its eight-year blockade of Gaza and free scores of Hamas prisoners.
Israel has refused to deal with a Palestinian unity government that emerged after Hamas signed a deal with Palestinian president Mahmud Abbas in April following years of bitter rivalry.
But Netanyahu said Israel was cooperating with the Abbas-led Palestinian Authority.
"We are cooperating with them and we are prepared to see a role for them," he said.
"It is important in the reconstruction of Gaza, assuring the humanitarian aid and also the security questions that arise that we have these discussions and cooperation," the premier added.
"In fact the ceasefire was coordinated among other things with them."
In a BBC interview, US Secretary of State John Kerry said there would have to be compromise on both sides in order to obtain a permanent ceasefire.
"How are we going to eliminate these rockets? How are we going to demilitarise and move towards a different future?" he asked.
Netanyahu said he spoke to Kerry on Wednesday by telephone and welcomed Kerry's remarks calling for the demilitarisation of Gaza.
He also sought to counter reports that Israeli-US relations took a knock over the offensive, following tough criticism in Washington over civilian casualties.
"We work very closely with him (Kerry), with the US administration with President (Barack) Obama throughout this operation and before," he said.