Three Palestinian militant groups holding a captured Israeli soldier have issued a new set of demands.
Houses near the interior ministry in Gaza were hit in an overnight raid
In a statement faxed to news agencies, the groups demanded that Israel release 1,000 prisoners from its jails and end an offensive in the Gaza Strip.
However Israel rejected the fresh conditions and repeated its demand for the release of Cpl Gilad Shalit.
Its jets have hit mostly unpopulated targets in Gaza for a fourth night as many Gazans suffer power blackouts.
A large Israeli force remains poised on Gaza's northern edge as mediators make last-ditch attempts to reach a solution.
The head of Egyptian intelligence, Omar Suliman, is due to arrive in the region on Saturday for talks with both Palestinians and Israelis.
In their statement, the groups - the militant wing of the ruling Palestinian party Hamas, and two much smaller militant groups - repeated an earlier demand for Israel to free women and children held in its jails in exchange for information on Cpl Shalit.
But in an additional "just and humanitarian" demand the groups requested that 1,000 "Palestinian, Arab and Muslim prisoners" be released by Israel.
The groups said these should include detained leaders of Palestinian militant movements and prisoners who are sick or facing very long sentences.
GAZA CRISIS TIMELINE
Sun 25 June: Cpl Gilad Shalit captured in cross-border attack
Mon 26 June: Palestinian Popular Resistance Committees demand prisoner releases in exchange for Gilad
Weds 28 June: Israeli military enters southern strip after launching air strikes on Gaza
Thurs 29 June: Israel detains dozens of Hamas officials
Sat 1 July: Groups holding Cpl Shalit demand 1,000 prisoners be released
There was no explicit offer to free Cpl Shalit in return, but a spokesman for Hamas's military wing told Reuters news agency he would be freed in such an event.
The statement refers to the "good efforts" of mediators, but says Israel's political leadership is under pressure from military sectors.
Israel rejected the demands.
"Prime Minister Ehud Olmert has reiterated that there will be no deals, that either Shalit will be released or we will act to bring about his release," Foreign Ministry spokesman Mark Regev said.
Late on Friday, Israeli TV reported the 19-year-old conscript Cpl Shalit had been visited and treated by a Palestinian doctor.
His father, Noam Shalit, later urged his son to "be patient and not lose hope", according to AFP news agency.
Strikes go on
Israel has been launching air strikes for a fourth successive night against what it says are facilities used by terrorists.
Palestinians said the latest strikes hit uninhabited areas near the Khan Younis and Rafah refugee camps in the southern Gaza Strip.
The BBC's Keith Adams says Gazans are learning to live without a good night's sleep, as the Israeli air force has been creating sonic booms - incredibly loud bangs that shake buildings and break windows - by flying fighter jets at supersonic speeds over the territory.
Relief agencies have warned of an imminent humanitarian crisis following the bombing of the main power plant.
Local doctors say many people are unable to keep food fresh, get clean water or adequate sanitation.
In other developments:
- Palestinian and Israeli diplomats traded accusations at an emergency session of the UN Security Council called by Arab nations - but a resolution condemning the Israeli offensive was blocked, apparently due to US opposition
- US ambassador to the UN John Bolton said the current situation would not have been reached "if it were not for Syria's support of and harbouring of terrorists" - and urged its president to help resolution efforts
- Palestinian Prime Minister Ismail Haniya denounced Israel's offensive as an attempt to bring down the Hamas-led government, and vowed it would not change its policies
- Israel revoked the East Jerusalem residency rights of a Hamas cabinet minister and three Hamas MPs held in mass detentions the previous day.