Israeli tanks and troops remain massed at the border with Gaza, but there are reports that Israel has postponed its military action planned in retaliation for a Palestinian suicide bombing earlier this week near Tel Aviv which killed 15 Israelis, wounding dozens more.
Israel has issued an emergency call up for reservists, and Palestinians are anticipating an incursion into the densely populated Gaza Strip, where the Islamic militant group Hamas has its stronghold.
About one million Palestinians live there, many in refugee camps.
But Israel's Channel 2 television reports that the proposed attack will be delayed. It quotes Israeli Defense minister Benjamin ben Eliezer as saying that because details of the operation have been leaked in the media that have allowed Palestinian forces to plan a counter-offensive. The Defense Minister's office refused to confirm or deny the report.
In the Jabaliah refugee camp, home to 80,000 Palestinians, militants say they have made military preparations for the Israeli attack. Various factional groups also say they have already joined forces in defending the camp.
The streets are piled high with sand and stones to block the path of Israeli tanks, and they say every night holes in the road are filled with explosives, which are removed in the mornings, so that no civilians will be harmed.
The militants say they have learned the lesson of the Jenin refugee camp, warning Israel that the fighting here will be even more bitter.
Twenty-three Israeli soldiers and at least 50 Palestinians died in Jenin last month, in the fiercest fighting of Israel's military operation in the West Bank. The Israeli army launched the incursions after Palestinian suicide attacks killed dozens of Israelis.
Since the latest attack near Tel Aviv, Tuesday, Palestinian security forces in Gaza have arrested about 20 members of Hamas, which was blamed for the suicide bombing.
In another development hundreds of Palestinians have turned out Friday for a hero's welcome to the 26 gunmen released from the church of the nativity in Bethlehem, after more than five weeks of under siege by Israeli troops.
The bus carrying the 26 gunmen was mobbed by cheering crowds, and cars accompanied it on a lap of honor through Gaza City, tooting their horns. Gunmen shot their rifles into the air.
The men were taken to a beachfront Gaza hotel where they will rest and receive medical check-ups before being allowed to go free. Although many are from Bethlehem, they will now live in Gaza. The men say they are mostly from the Al Aqsa Martyrs Brigades, the militant group linked to Palestinian leader Yasar Arafat's Fatah movement.
Israel describes them as "junior terrorists" and has asked the Palestine Authority to take some legal action against them. But Palestinian officials say the men will not be jailed.