Israel says its military pressure on Hamas is proving effective
Israeli planes have carried out fewer air strikes on the Gaza Strip overnight, as some reserve units went into action on the ground.
There were 12 air raids - compared with as many as 60 on previous nights. At least nine rockets or mortars were fired on Israel from Gaza on Monday.
The Israeli military denied stepping up a ground offensive against Hamas, despite renewed fierce fighting.
Earlier, PM Ehud Olmert said Israel was nearing its military goals.
Reports suggest diplomatic efforts between Egypt and Hamas in Cairo are progressing.
After meeting Egyptian President Hosni Mubarak, Middle East Quartet envoy Tony Blair said elements were in place for a ceasefire agreement.
"I am hopeful we can put an agreement together but it's going to have to be worked on very hard and it's got to be credible," he told journalists.
At least five Palestinians including one militant were killed on Monday, bringing the total Palestinian death toll during the conflict to about 900, Palestinian medics said. Israel says 13 Israelis have died.
There were reports of fierce fighting around Gaza City. Reservists were reported to be securing areas gained in the fighting, as regular troops continued their advance.
Israel is preventing international journalists from entering the coastal strip, making it impossible to independently confirm such figures.
Israel hopes the scale of its operation will greatly reduce the number of missiles fired from Gaza into southern Israel, while eroding support for Hamas.
Militants fired more than 20 rockets on Sunday, slightly injuring three people. At least nine were fired on Monday, one on the town of Ashkelon, striking a house, and one on Kiryat Gat, but none of them caused casualties.
Israeli government spokesman Mark Regev told the BBC Israel's goals were "very minimalistic" and "purely defensive".
"We refuse, we refuse to return to a reality in which the Israeli civilian population has to live in that constant fear of an incoming Hamas rocket," he said.
Confirming the deployment of reserve soldiers, Mr Regev said reservists had been called up "a few days back" to augment Israeli forces.
I think we could sum it by saying that it's been a living hell for the Palestinians
The Israeli military said some were being used to refresh troops currently in action in Gaza, but that this did not yet constitute an escalation of the campaign.
Brig Gen Avi Benayahu, Israel's chief military spokesman, said thousands more - who are to comprise a new, expanded phase in the ground operation - were still in training and had not been deployed.
On Sunday Israel dropped new leaflets into Gaza and left phone messages warning Gazans to stay away from areas used by Hamas, the Associated Press reported.
In Cairo, talks between Hamas and Egyptian intelligence chief Omar Suleiman were described by an unnamed intelligence official as "positive", the state news agency reported, without providing details.
Gaza facing 'medical crisis'
On Sunday, after an Israeli cabinet meeting in Jerusalem to consider the country's next move, Mr Olmert praised the military's "impressive gains" in Gaza and said it was time to "translate our achievements into the goals we have set".
"Israel is nearing the goals which it set itself, but more patience, determination and effort is still demanded."
Referring to last week's UN Security Council call for an immediate ceasefire, Mr Olmert said "nobody should be allowed to decide for us if we are allowed to strike".
Both Hamas and Israel have rejected the UN resolution.
As the fighting continued, a spokesman for the charity Save the Children said it was impossible for aid workers to do their jobs in Gaza.
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