Israeli air and ground attacks continued into early Friday. It was a response to the firing by Palestinian militants in Gaza of an anti-tank missile that hit a school bus in southern Israel that had just dropped off most the children it was carrying.
Israeli officials say a second missile failed to hit Israel and landed in Gaza.
Defense Minister Ehud Barak called for a quick army response, and had a warning for Hamas. He says Israel holds Hamas responsible for any attack that comes from Gaza and expects Hamas to understand what is permitted and what is forbidden.
Hours later, Hamas leaders said they conferred with militant groups that have been firing missiles and had agreed to a ceasefire.
Gaza journalist Mohammed Dawas, reporting for VOA, says the Israeli assault continued into Friday morning.
"People are really quiet and people are fearful of what's going to happen. Nobody knows what's going to be the next Israeli step," he said. "People, the civilians, don't know really what's going to happen in the next hour, so people are trying to be home, safe. Now, I look from my window, nobody on the streets, no cars, nothing whatsoever."
Hours after Hamas announced a ceasefire, Israeli forces continued their assault, using helicopters, drones, and tank fire. Israeli army spokeswoman Lieutenant Colonel Avital Leibowitz says the aim is to prevent further attacks from Gaza.
"The targets include tunnels and also different warehouses, storage for weapons of all sorts," he said. "We are not looking for any escalation. However, we will not tolerate any attempts of the terror organizations trying to target innocent Israeli civilians."
Israeli aircraft hit tunnels in the south of the Gaza Strip where Israel says hundreds of missiles and other weapons are being smuggled in through Egypt. Israeli officials believe the source of the weapons is Iran, which supports Hamas.
Israel says its new missile defense system, known as Iron Dome, on Thursday successfully intercepted a Grad rocket that militants in Gaza fired toward the southern Israeli port city of Ashkelon.
The last few weeks have seen an escalation of violence along the Israel-Gaza border, and the heaviest fighting since Israel's 17-day assault on the enclave more than two years ago.