Air strikes continued in Gaza as Israel prepared to announce a truce
The Israeli cabinet is set to back an end to offensive military activities in the Gaza Strip, three weeks after attacks began, the BBC understands.
In a televised address, PM Ehud Olmert said the aims of the operation had been attained - sometimes exceeded.
Mr Olmert was speaking after a meeting of Israel's cabinet which sources said approved the unilateral Israeli move.
In an initial reaction earlier, a Hamas spokesman said the group would fight until its demands were met.
"We will not accept less than stopping the aggression, ending the occupation and lifting the siege and opening all the crossings," said Fawzi Barhoum, in a statement broadcast by Hamas television.
Minutes before Mr Olmert was due to speak, a rocket was fired from Gaza, a BBC producer in Gaza said.
Israeli media said a Hamas rocket had hit a house in the city of Ashdod, but caused no injuries.
UN Secretary General Ban Ki-moon said the Israeli ceasefire had to be accompanied by the withdrawal of its troops from Gaza.
Nearly 1,200 Palestinians have been killed since the violence began on 27 December. Thirteen Israelis - three civilians and 10 soldiers - have been killed during the campaign.
The Israeli move comes amid intense diplomacy aimed at ending the conflict.
Earlier, Israeli sources told the BBC's Middle East editor, Jeremy Bowen, that Mr Olmert would announce an end to offensive military operations from "H-Hour", the exact timing of which is not yet clear.
Mr Olmert was expected to link the move to Israel having achieved its goal of curtailing rocket fire from Hamas-linked militants, the sources said.
If rocket fire continued after "H-Hour", Israel would respond, the sources said.
If there was a single incident, Israel would hit back "surgically"; if there were more attacks Israel would go back on the offensive, they said.
The sources stressed that this was a unilateral action by Israel.
It follows pledges from the US and several European Union nations to help prevent arms smuggling into Gaza - one of Israel's key demands.
How Hamas responds remains to be seen. Its representatives have been attending talks hosted by Egyptian President Hosni Mubarak in Cairo.
HAVE YOUR SAY
If Hamas is not involved then the cease fire is agreed with whom?
Khizar Mohammed, Mumbai, India
Hamas insists that any ceasefire must involve Israeli troops withdrawing from Gaza and an immediate lifting of the Israeli blockade.
The BBC's Lyse Doucet, in Tel Aviv, said the truce was an attempt by Israel to seize the moral high ground - but also underlined the failure of the so-called Egyptian initiative to come up with terms for a ceasefire.
The announcement came on the 22nd day of violence in Gaza.
United Nations officials said two children, aged five and seven, were killed when Israeli tank fire hit a UN school where hundreds had taken shelter in the northern town of Beit Lahiya.
Chris Gunness, a spokesman for the UN Relief and Works Agency (Unrwa), said: "There has to be an investigation to determine whether a war crime has been committed."
An Israeli foreign ministry spokesman, Yigal Palmor, told the BBC that Israel was waiting for more information on what happened.
The Israel military said Hamas fired seven rockets into Israel on Saturday; there were no casualties.